The finance director of Achiote Ltd would like your advice on the tax implications of the acquisition of two intangible fixed assets.

Achiote Ltd:
– Owns 100% of the ordinary shares in Borage Ltd and 80% of the ordinary shares in Caraway Inc.
– Achiote Ltd and Borage Ltd are resident in the UK. Caraway Inc is resident in the country of Nuxabar.
– All three companies are trading companies and prepare accounts to 31 March annually.

Borage Ltd – purchase of intangible fixed assets:
– Borage Ltd purchased the goodwill of an unincorporated business for £62,000 on 1 September 2016.
– Borage Ltd will amortise this goodwill in its accounts on a straight-line basis over a five-year period.
– Borage Ltd also purchased a patent from Achiote Ltd for £45,000 on 1 January 2017.
– Achiote Ltd had purchased the patent for £38,000 on 1 January 2014.
– The patent was being amortised in Achiote Ltd’s accounts on a straight-line basis over a ten-year period.
– Borage Ltd will continue to amortise the patent over the remainder of its ten-year life.

Required:
(a) Explain, with supporting calculations where appropriate, the corporation tax treatment in the year ended 31 March 2017, of the goodwill and the patent acquired by Borage Ltd. (4 marks)