As promised at the time of the Autumn Budget, the Government has launched a consultation on reform of the intangible fixed asset regime. It runs until 11 May 2018.
It's an appropriate time to look at the reform of this regime. US tax reform and the implementation of BEPS proposals will be concentrating the minds of tax directors of MNEs on how intangibles are held and exploited.
The consultation is asking for comments on four specific areas: the exclusion of pre-2002 assets; the exclusion of goodwill and customer-related intangibles; the de-grouping charge; and the election for fixed rate relief at 4 per cent per year.
Reform of the degrouping charge is particularly pressing. The failure to incorporate reforms to the intangible fixed asset regime within the reforms to the degrouping charge for chargeable gains in 2011 was a major flaw in otherwise sensible and practical measures. With increasing value in post-2002 intangibles, many groups are being forced into using the rather cumbersome statutory demerger regime in order to secure tax neutral treatment for reconstructions. The problem will become more acute if - as suggested elsewhere in the consultation paper - pre-2002 assets are brought within the rules. This consultation presents an opportunity to produce a more coherent regime.