Is TAB required under IFRS 3?

Yes, where the buyer's jurisdiction permits tax amortisation of the acquired intangible. IFRS 3 (UK and global) and IFRS 13 require fair value to reflect market-participant assumptions. A market participant who amortises the asset for tax purposes pays a price that incorporates the present value of the tax shield. Omitting TAB understates fair value and will be challenged in audit. In jurisdictions that do not permit tax amortisation, TAB is set to zero — there is no tax shield to capture.

How is TAB different from the broader "amortisation benefit" concept?

TAB is a specific, formulaic adjustment used in income-approach fair-value determination. The broader amortisation-benefit concept is an informal term used in lender presentations, management reporting, and sell-side commentary to describe financial-statement effects of amortisation post-recognition. The two concepts share a name but answer different questions. In a formal valuation report, use TAB; the broader term should be avoided to prevent scope confusion.

What tax rate should I use in the TAB calculation?

The blended tax rate that would apply to the income generated by the asset in the buyer's jurisdiction. For a UK acquirer, this is typically the corporation tax rate (25% from April 2023). For a US acquirer, it is federal (21%) plus the state blend, applied at the asset level (often around 24-26%). For multi-jurisdictional businesses, the asset-level rate reflects where the income is generated, not the group consolidated rate. Using the group rate where it differs from the asset-level rate is a common challenge in audit.

What is the standard amortisation period for TAB in the US?

15 years under §197 IRC for federal income tax purposes, applied straight-line. This applies regardless of the asset's economic or accounting useful life. So a developed-technology asset with a 7-year accounting useful life is amortised over 15 years for US federal tax — and the 15-year period drives the TAB calculation. The mismatch between accounting and tax life is the source of the deferred-tax liability that typically appears in US PPA work.

Does TAB apply to UK acquisitions?

Yes, for qualifying assets under CTA 2009 Part 8 (the intangible assets regime). The regime applies to intangibles created or acquired after 1 April 2002. There are specific carve-outs and election rules — particularly the fixed-rate election at 4% straight-line introduced by Finance Act 2019 for some pre-2020 acquisitions, and exclusions for related-party transactions in defined cases. The asset's qualification under the regime drives whether TAB applies and what amortisation period feeds the calculation.

Does TAB apply to goodwill?

This is jurisdiction-specific. In the US under §197, goodwill is amortisable straight-line over 15 years for tax — so TAB conceptually applies, but goodwill is not separately recognised at fair value in PPA; it is the residual. The TAB on goodwill effectively raises the implied goodwill value, but this is captured by reducing the identifiable intangibles' TAB-uplifted fair values. In the UK, the goodwill amortisation regime was suspended for acquisitions between 8 July 2015 and 1 April 2019, and partially restored for goodwill linked to qualifying IP under the post-2019 regime. The TAB treatment follows the available deduction.

Why does the discount rate matter to TAB?

The TAB factor formula uses the present-value annuity factor at the discount rate. A lower discount rate produces a higher TAB factor (the tax shield is worth more in present-value terms); a higher discount rate produces a lower TAB factor. Where the underlying income-approach method uses a different discount rate to the TAB calculation, the inconsistency is a common audit challenge. The defensive position is to use the same discount rate throughout — or to document the difference and justify it.

What happens to TAB when the buyer cannot amortise the asset?

TAB is set to zero. If the buyer's jurisdiction does not permit tax amortisation of the acquired asset, or if the specific asset class is excluded from the available regime, there is no tax shield to capture and the pre-TAB value is the fair value. This is increasingly common for cross-border deals where the asset sits in a jurisdiction that does not have a comprehensive intangible-assets tax regime. The fair-value report should explicitly document why TAB has been set to zero — silent omission gets challenged.

Valuation Method

TAB vs Amortisation Benefit

TAB is a formulaic adjustment in income-approach fair-value work; amortisation benefit is the broader commentary term used by lenders and sell-side.

The Tax Amortisation Benefit (TAB) is a specific, mechanical adjustment used in income-approach valuation that grosses up an intangible's fair value to reflect the present value of the tax deduction a buyer would receive by amortising the asset. The broader amortisation-benefit concept describes financial-statement and covenant effects of amortisation post-recognition — a different question entirely. Under IFRS 3 (UK and global) and ASC 805 (US), TAB is the operative concept; amortisation benefit in the broader sense is a financial-planning topic.

Criteria	Tax Amortisation Benefit (TAB)	Amortisation Benefit (Broader Concept)
Definition	Present value of tax deductions available to a buyer who amortises the asset post-acquisition	Catch-all term for financial-statement or covenant effects of amortisation
Where it applies	Income-approach valuation in PPA, impairment testing, IP-backed lending	Lender presentations, management reports, sell-side pro-forma adjustments
Regulatory anchor	IFRS 3 / IFRS 13 (UK and global); ASC 805 / ASC 820 (US)	None — informal usage
Jurisdictional drivers (UK)	CTA 2009 Part 8 (corporation tax intangible assets regime)	UK GAAP and IFRS reporting; covenant definitions in loan agreements
Jurisdictional drivers (US)	§197 IRC (15-year straight-line amortisation)	US GAAP reporting; covenant definitions in indentures and credit agreements
Calculation	Formulaic: TAB factor = n / [n − annuity-factor × tax rate]	Variable — depends on context (covenant carve-out, EBITDA add-back, DCF cross-check)
Typical magnitude	10-25% uplift on pre-TAB value	Variable — sometimes material, sometimes immaterial
Audit treatment	In scope for PPA audit; tested by valuation specialist	Out of scope for fair-value audit; may be discussed in covenant review
Effect on fair value	Increases fair value of the asset	No direct effect — describes downstream financial-statement effects
Asset qualification check	Must confirm asset qualifies for tax amortisation in buyer jurisdiction	No qualification check applies
Common pitfall	Applying TAB to non-qualifying assets; using wrong tax rate; discount-rate inconsistency	Conflating with TAB in formal reports; using shorthand in audit documentation

When to Use Each Approach

Tax Amortisation Benefit (TAB)

Income-approach fair-value determination under IFRS 3 (UK and global) or ASC 805 (US)
PPA work where the buyer's jurisdiction permits tax amortisation
Impairment testing of recognised intangibles
IP-backed lending where asset-level fair value is the collateral basis

Amortisation Benefit (Broader Concept)

Lender presentations where covenant ratios exclude amortisation
Management commentary on the gap between accounting profit and operating cash
Sell-side pro-forma EBITDA adjustments
Strategic planning around the cash-vs-accounting return on intangible investment

Our Verdict

TAB is the formal, formulaic adjustment used in fair-value determination — required under IFRS 3 (UK and global) and ASC 805 (US) where the buyer's jurisdiction permits tax amortisation. The broader amortisation-benefit concept is a commentary term used outside fair-value reports. In formal valuation work, use TAB and define it precisely; reserve the broader term for non-technical conversations.

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TAB vs Amortisation Benefit

When to Use Each Approach

Tax Amortisation Benefit (TAB)

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Our Verdict

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