Current Issues in the Taxation of Intangibles: An Attempt to Tax 'Scotch Mist'?

This paper considers some of the aspects of taxation of intangibles presently of concern in Australia and the United Kingdom. The paper will attempt to identify the opportunities presented for tax minimisation involving intangibles, and suggest appropriate responses. The paper will describe and evaluate the developments in the area of taxation of intangibles that are taking place in the United Kingdom where the 2001 budget has announced favourable taxation treatment of the acquisition of intangibles by corporations, and in Australia, where the tax value method poses particular problems for intangibles. The paper will also consider the latest technical note by the UK Inland Revenue concerning reforms to the taxation of intellectual property, goodwill and other intangible assets and will consider these developments in the context of the issue of transfer pricing of intangibles in both the UK and Australia with particular emphasis on the difficulties encountered in attempting to apply the arm's length consideration rules required in Australia, the UK and other signatories to the OECD Guidelines on transfer pricing.