Technical Update:

Tax Update: Proposed changes to intangible asset depreciation

14 February 2017

On 7 December 2015, the Government announced proposed changes to the depreciation of certain intangible assets acquired from 1 July 2016. Under these changes, all businesses will be able to:

  • Self-assess the tax effective life (EL) for depreciation of acquired intangible assets such as patents, or
  • Continue to have the option to use existing statutory effective life to depreciate intangible assets (see table below).

Although the change is not yet law, the draft legislation is proposed to be introduced into Parliament before the end of March and therefore, now is a good time to consider if your business will benefit from these proposed changes if you have acquired (post 1 July 2016), or are thinking of acquiring, intangible assets of significant value.

Current law

The current law does not allow for the self-assessment of effective life for intellectual property (which is available for other deprecating assets). Therefore you currently have no option but to use the statutory effective life of intangible assets, which under the current uniform capital allowance regime is set out in the table below:

  Asset Effective life in years
1 Standard patent 20
2 Innovation patent 8
3 Petty patent 6
4 Registered design 15
5 Copyright (except copyright in a film) The shorter of 25 years from when you acquire it or the period until the copyright ends
6 A licence (except one relating to a copyright or in-house software) The term of the licence
7 A licence relating to a copyright (except copyright in a film) The shorter of 25 years from when you become the licensee or the period until the licence ends
8 In-house software 5*
9 Spectrum licence The term of the licence
10 Datacasting transmitter licence 15
11 Telecommunications site access right The term of the right

We will be watching this space and shall keep you updated when the proposed change receives Royal Assent.

If you have any questions in relation to the above, please contact your local Tax Partner.