What is amortisation of intangible assets?
Answered 17 March 2026
Amortisation of Intangible Assets
What the law says
Definition and tax treatment (CTA 2009, Part 8)
An "intangible fixed asset" is an intangible asset acquired or created by a company for use on a continuing basis in the course of the company's activities (s.713 CTA 2009).
Amortisation is the systematic writing-down of the capitalised cost of an intangible fixed asset over its useful life. For UK corporation tax purposes, Part 8 of CTA 2009 operates as an accounting-based regime: a company is subject to corporation tax on the profits and losses shown in its accounts in respect of those assets.
Writing down on an accounting basis (s.729 CTA 2009)
Where, in a period of account, a loss is recognised in determining a company's profit or loss in respect of capitalised expenditure on an intangible fixed asset — either by way of amortisation or as a result of an impairment review — a corresponding debit must be brought into account for tax purposes.
The formula for calculating the tax debit is:
- In the period of capitalisation:
L × E/CE(where L = accounting loss, E = expenditure recognised for tax, CE = amount capitalised) - In subsequent periods:
L × WDV/AV(where WDV = tax written-down value immediately before the charge, AV = accounting value immediately before the charge)
Writing down at a fixed rate (s.730 CTA 2009)
As an alternative, a company may elect to write down the cost of an intangible fixed asset at a fixed rate of 4% per annum, regardless of whether or how the asset is amortised in its accounts. The election must be made in writing to HMRC no later than 2 years after the end of the accounting period in which the asset is created or acquired, and is irrevocable.
For relevant assets (certain goodwill and related assets) created or acquired on or after 1 April 2019, the fixed rate is increased to 6.5% and the election is treated as having been made automatically.
HMRC guidance / practice
Accounting standards and amortisation periods
Under FRS 102 (the current UK GAAP standard), goodwill and intangible assets must be amortised on a systematic basis over their useful life. The amortisation method should reflect the expected pattern in which the asset's future economic benefits are consumed; if that pattern cannot be reliably determined, the straight-line method should be used. All intangible assets under FRS 102 are considered to have a finite useful life, capped at 10 years where a reliable estimate cannot be made.
Under FRS 10 (old UK GAAP), there was a rebuttable presumption that useful life would not exceed 20 years; assets with indefinite lives were not amortised but subject to annual impairment reviews instead.
Under IFRS (IAS 38), systematic amortisation of goodwill is not permitted — it is instead reviewed annually for impairment. Other intangible assets with finite useful lives are amortised systematically; those with indefinite lives are not amortised but are reviewed annually for impairment.
Practical effect of the fixed-rate election
HMRC guidance notes that the main practical effect of the s.730 fixed-rate election is to make tax relief available for the cost of acquiring the most durable types of intangible asset, regardless of whether or not that cost is amortised at all in the accounts or is amortised over a different period. An example would be a trade mark with an indefinite useful economic life.
Consolidated accounts
In determining whether GAAP has been properly applied to amortisation, HMRC may have regard to any consolidated accounts drawn up in respect of the group of which the taxpayer company is a member, including the view taken of the useful life or economic value of an asset reflected in those accounts — provided the treatment does not substantially diverge from UK GAAP.
Summary
In short, amortisation of intangible assets is the gradual write-off of the capitalised cost of an intangible fixed asset over its useful economic life, reflecting the consumption of the asset's economic benefits. For UK corporation tax purposes, this generates a tax debit under Part 8 CTA 2009, either following the accounting treatment (s.729) or at a fixed rate elected by the company (s.730/s.731).
Citation sources
olicy (straight-line over a UEL of 10 years) may not have been appropriate…” and “Ms Brotherston’s view is that a 20-year useful economic life may have been a more appropriate period of amortisation”. We have added the emphasis. 250. The experts agreed that to be UK GAAP compliant, the amortisation period has to be in a range that means that the accounts are reliable and give a true and fair view. 251. In his oral evidence, Mr Chidgey was very clear that he had not arrived at a ten year amortisa
Overview 1. This is an appeal against assessments (“the assessments”) issued under para 41 of schedule 18 of the Finance Act 1998 (“FA 1998”) and closure notices (“the closure notices”) given under para 32 of schedule 18 FA 1998 as shown in the table below in respect of the appellant’s corporation tax position in the accounting periods ended on 30 April in each of the stated years: Accounting periodAmountDateDecision 2012 £10,000 30 April 2018 Assessment 2013 £10,000 29 April 2019 Assessment 201
riods, as if the partnership were a company, and without regard to any change in the persons carrying on the trade…”. Part 8 12. The second group of provisions are part of the code set out in Part 8 dealing with the treatment of intangible fixed assets and goodwill for UK corporation tax purposes. In very broad terms, the code so created is an accounting-based regime pursuant to which a corporation tax payer is subject to corporation tax in respect of intangible fixed assets and goodwill on the
A company may elect for fixed rate deductions in respect of a particular intangible fixed asset, regardless of its accounting treatment. A company may also be subject to a 6.5% fixed rate in relation to relevant assets created or acquired on or after 1 April 2019 (see CIRD44055 onwards). The main practical effect of these provisions is to make tax relief available for the cost of acquiring the most durable types of intangible asset regardless of whether or not that cost is amortised at all in th
Part 8 Intangible fixed assets Chapter 3 Debits in respect of intangible fixed assets Writing down at fixed rate: election for fixed-rate basis 730 1 A company may elect to write down the cost of an intangible fixed asset for tax purposes at a fixed rate. 2 The election may be made whether or not the asset is written down for accounting purposes. 3 The election may only be made— a in writing, b to an officer of Revenue and Customs, and c not later than 2 years after the end of the accounting per
Part 8 Intangible fixed assets Chapter 3 Debits in respect of intangible fixed assets Writing down on accounting basis 729 1 If in a period of account a loss is recognised in determining a company's profit or loss in respect of capitalised expenditure on an intangible fixed asset— a by way of amortisation, or b as a result of an impairment review, a corresponding debit must be brought into account for tax purposes. 2 The reference in subsection (1) to an “ impairment review ” does not include th
FRS102 s18 and s19 require goodwill and intangible assets to be amortised on a systematic basis over their useful life. The amortisation method should reflect the expected pattern in which the asset's future economic benefits are expected to be consumed. If the pattern cannot be determined reliably, the straight-line method should be used.
Part 8 Intangible fixed assets Chapter 15A Debits in respect of goodwill and certain other assets Requirement to write down at a fixed rate Requirement to write down at a fixed rate 879B 1 This section applies if a company acquires or creates a relevant asset on or after 1 April 2019. 2 The company is to be treated as having made an election under section 730 to write down the cost of the asset for tax purposes at a fixed rate. 3 In its application in relation to the asset, section 731 (writing
The principle differences between IAS38/IFRS3 and FRS102 s18 and s19 which may have an impact for Part 8 purposes are as follows: Under IFRS Systematic amortisation of goodwill is not permitted. Instead, goodwill is reviewed annually for impairment. Intangible assets other than goodwill can have an indefinite or a finite useful life. For intangible assets with a finite useful life, an estimate of the useful life must be made (there is no presumed maximum of 10 years in cases where a reliable est
The principle differences between FRS10 and FRS102 s18 and s19 which may have an impact for Part 8 purposes are as follows: Under FRS10 There is a rebuttable presumption that the useful life will not exceed 20 years. However, in cases where rebuttal is appropriate, both goodwill and intangible assets can be regarded as having an indefinite useful life. There is no presumed maximum of 10 years in cases where a reliable estimate cannot be made. Goodwill and intangible assets with finite useful liv
In determining whether GAAP has been properly applied, it is possible to have regard to any consolidated accounts drawn up in respect of the group of which the taxpayer company is a member. The provisions specifically permit reference to be made to any view taken ofthe useful life or economic value of an asset where that view lies behind the treatment in the consolidated accounts. The consolidated accounts, to which reference can be made for this purpose, need not have been prepared under GAAP.