Where a partnership includes members who are companies, corporation tax principles apply to the companies’ share of profits. This means that where the partnership owns intangible assets the corporate members can claim a corporation tax deduction for amortisation of those assets.
Relief for amortisation is available only where the asset was acquired or created on or after 1 April 2002. There are rules that deal with the situation where assets are acquired from related parties, including participators in companies, however the treatment of partnerships is unclear.
As a result, where an intangible asset is transferred into a partnership with a corporate member, it is unclear as to how the commencement rules apply to the corporate members. This could enable a corporate member to claim a corporation tax deduction for amortisation of an intangible asset which would be treated as a pre-1 April 2002 asset if the commencement rules applied to the acquisition.
Legislation has been introduced with effect from 25 November 2015 to confirm that the commencement rules apply to transfers of intangible assets into partnerships where there are corporate members.
This change makes it clear that corporation tax relief is not available to a corporate member of a partnership where the partnership acquires “old” intangibles from a related party.