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What you NEED to know about intangible assets

by , 10 January 2014
Intangible assets are non-monetary assets without physical substance. Read on to find out more about these assets and how you or your can benefit from them.

Don't know what intangible assets are?

Here's an explanation for you.

Here's what you must know about intangible assets

The Practical Tax Loose Leaf Service explains that intangible assets are non-monetary assets without physical substance. For example: Goodwill, patents, trademarks, brand names, copyrights, franchises, licences, know-how and publication titles.

It's hard to work out the value of an intangible asset, because you can't see or touch it. Take, for example, goodwill. This is valued on the basis of economic value (being the annual profits derived over a two or three year period). If you want to sell your interest in a company, goodwill will then be considered.

Intangible assets: What is goodwill?

Goodwill's an accounting concept that means the value of an asset is intangible, but has a value that can be calculated, for example a company's reputation with its clients.

If you develop or buy patents and similar rights they can form part of your company's goodwill calculation.

The Income Tax Act lets you deduct an allowance for expenditure you incur when you develop or buy certain intangible property or assets.
The allowance is then granted for the following expenditure incurred by you or your company:
  • If you incur expenditure for developing an invention, creating or producing a design, trademark, a copyright or any other property of a similar nature;
  • If you incur expenditure for getting a patent or the restoration of a patent, the registration of a design, the registration of any trademark or under similar laws of any other country; and
  • If you incur expenditure in buying (by assignment) any patent, design, trademark, copyright or any knowledge connected with the use of the patent, design, trademark, copyright or other property from someone else or the right to have the knowledge imparted.

Remember, an allowance will only be granted if you use the trademark, patent, invention, design, copyright or knowledge in the production of your income.

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