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Chapter BIM35640

Document Cited in Related
Vincent
Published date22 November 2013
Record NumberBIM35640
CourtHM Revenue & Customs
IssuerHM Revenue & Customs

Expenditure incurred on advertising to establish a market share for a new product or brand may be capital. An asset of this type is normally developed from scratch in-house although it may occasionally be built up from the acquisition of a struggling brand name or the rights in an invention.

See, however, BIM35501 for the Corporation Tax intangible fixed assets legislation, which may require the accounting entries in respect of brand names to be followed in computations of income for Corporation Tax, even if those entries are of a capital nature.

Where the intangible assets legislation does not apply, in deciding whether or not such expenditure is capital the following factors will be relevant:

  1. Whether the expenditure creates an asset of a capital nature.
  2. The length of time the advantage is likely to endure.
  3. The use of the asset in the context of the particular trade.
  4. The treatment of the expenditure in the taxpayer’s accounts.
  5. No one factor is likely to be decisive. You are likely to have a stronger case where:

  1. The product is one that does not vary over time.
  2. The maintenance of quality is not problematical.
  3. The business is one where customers tend...

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