Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 9 — Application of this Part to groups of companies
383

(4)
If the unpaid tax is charged in a self-assessment, the date mentioned in
subsection (1) is the latest of—
(a)
the last date on which notice of enquiry may be given into the return
containing the self-assessment,
(b)
if notice of enquiry is given, 30 days after the enquiry is completed,
5
(c)
if more than one notice of enquiry is given, 30 days after the last notice
of completion,
(d)
if after such an enquiry an officer of Revenue and Customs amends the
return, 30 days after notice of the amendment is issued, and
(e)
if an appeal is brought against such an amendment, 30 days after the
10
appeal is finally determined.
(5)
If the unpaid tax is charged in a discovery assessment, the date mentioned in
subsection (1) is—
(a)
if there is no appeal against the assessment, the date when the tax
becomes due and payable, and
15
(b)
if there is such an appeal, the date on which the appeal is finally
determined.
(6)
In this section—
“self-assessment” includes a self-assessment that supersedes a
determination as a result of paragraph 40 of Schedule 18 to FA 1998,
20
and
“discovery assessment” means an assessment under paragraph 41(1) of
that Schedule.
Disregard of payments between group members for reliefs
799
Disregard of payments between group members for reliefs
25
(1)
If a payment for group roll-over relief or for the reallocation of a degrouping
charge does not exceed the amount of the relevant relief—
(a)
it is not taken into account in calculating profits or losses of either of the
companies involved for corporation tax purposes, and
(b)
it is not a distribution for any of the purposes of the Corporation Tax
30
Acts.
(2)
A payment for group roll-over relief is a payment made—
(a)
in connection with a claim for relief under Chapter 7 (roll-over relief in
case of realisation and reinvestment) made because of—
(i)
section 777 (relief on realisation and reinvestment: application
35
to group member), or
(ii)
section 779 (rules that apply to cases within section 778(1)),
(b)
by the company whose proceeds of realisation are reduced as a result
of the claim,
(c)
to a company whose acquisition costs are reduced (in a case within
40
section 777) or the tax written-down value of whose assets is reduced
(in a case within section 779) as a result of the claim, and
(d)
in accordance with an agreement between those companies in
connection with the claim.
(3)
A payment for the reallocation of a degrouping charge is a payment made—
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 10 — Excluded assets
384

(a)
in connection with an election under section 792 (reallocation of charge
within group),
(b)
by the company to which the chargeable realisation gain accrues,
(c)
to the company to which as a result of the election the whole or part of
that gain is treated as accruing, and
5
(d)
in accordance with an agreement between those companies in
connection with the election.
(4)
In the case of a payment in connection with such a claim for relief as is
mentioned in section 777(3), the amount of the relevant relief is the amount of
the reduction, as a result of the claim, in the acquisition costs of the company
10
to which the payment is made.
(5)
In the case of a payment in connection with such a claim for relief as is
mentioned in section 778(4), the amount of the relevant relief is the amount of
the reduction, as a result of the claim, in the tax written-down value of the
assets of the company to which the payment is made.
15
(6)
In the case of a payment in connection with an election under section 792, the
amount of the relevant relief is the amount treated as a result of the election as
accruing to the company to which the payment is made.
Chapter 10
Excluded assets
20
Introductory
800
Introduction
(1)
This Chapter provides for the exclusion from this Part of certain assets.
(2)
This Chapter provides for 3 kinds of exclusion—
(a)
assets within sections 803 to 809 are wholly excluded from this Part,
25
(b)
assets within sections 810 to 813 are excluded from this Part except as
respects royalties, and
(c)
assets within section 814 or 815 are excluded from this Part to the extent
specified in that section.
(3)
For further rules about the exclusion of assets from this Part, see—
30
(a)
Chapter 16 (pre-FA 2002 assets etc), and
(b)
section 902 (assets held by a life insurance company for the purposes of
its life assurance business).
801
Right to dispose of or acquire excluded asset also excluded
So far as an asset of any description is excluded from this Part by this Chapter,
35
an option or other right to acquire or dispose of an asset of that description is
similarly excluded.
802
Effect of partial exclusion
(1)
If because of any of sections 803 to 815 an asset is excluded to the extent that—
(a)
it represents particular rights,
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 10 — Excluded assets
385

(b)
it is an asset of a particular description,
(c)
it is held for particular purposes, or
(d)
it represents expenditure of a particular kind,

this Part applies as if there were a separate asset representing so much of the
asset as is not so excluded.
5
(2)
The other provisions of the Corporation Tax Acts apply as if there were a
separate asset representing so much of the asset as is excluded.
(3)
Any apportionment necessary for the purposes of this section must be made on
a just and reasonable basis.
Assets wholly excluded from this Part
10
803
Non-commercial purposes etc
This Part does not apply to an intangible fixed asset so far as it is held—
(a)
for a purpose that is not a business or other commercial purpose of the
company, or
(b)
for the purpose of activities in respect of which the company is not
15
within the charge to corporation tax.
804
Assets for which capital allowances previously made
(1)
This Part does not apply to an intangible asset of a company if conditions A, B
and C are met.
(2)
Condition A is that the asset falls to be treated as an intangible asset in accounts
20
of the company.
(3)
Condition B is that in a previous period of account the asset fell to be treated as
a tangible asset in accounts of the company.
(4)
Condition C is that an allowance under Part 2 of CAA 2001 (plant and
machinery allowances) was made to the company in respect of the asset on the
25
basis that it was a tangible asset.
805
Rights over tangible assets
This Part does not apply to an intangible fixed asset so far as it represents—
(a)
rights enjoyed by virtue of an estate, interest or right in or over land, or
(b)
rights in relation to tangible movable property.
30
806
Financial assets
(1)
This Part does not apply to financial assets.
(2)
In this Part “financial asset” has the same meaning as it has for accounting
purposes.
(3)
“Financial asset” includes—
35
(a)
loan relationships (see Parts 5 and 6),
(b)
derivative contracts (see Part 7),
(c)
contracts or policies of insurance or capital redemption policies, and

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 10 — Excluded assets
386

(d)
rights under a collective investment scheme within the meaning of
FISMA 2000 (see section 235 of that Act).
807
Rights in companies, trusts etc
(1)
This Part does not apply to an asset so far as it represents—
(a)
shares or other rights in relation to the profits, governance or winding
5
up of a company,
(b)
rights under a trust, or
(c)
the interest of a partner in a firm.
(2)
Subsection (1)(b) does not apply to rights that for accounting purposes fall to
be treated as representing an interest in trust property that is an intangible
10
fixed asset to which this Part applies.
(3)
Subsection (1)(c) does not apply to an interest that for accounting purposes
falls to be treated as representing an interest in partnership property that is an
intangible fixed asset to which this Part applies.
808
Assets representing production expenditure on films
15
(1)
This Part does not apply to an intangible fixed asset held by a film production
company so far as it represents production expenditure on a film to which
Chapter 2 of Part 15 (taxation of activities of film production company) applies.
(2)
In this section—
(a)
“film” has the same meaning as in Part 15 (see section 1181),
20
(b)
“film production company” has the same meaning as in that Part (see
section 1182), and
(c)
“production expenditure” has the same meaning as in that Part (see
section 1184(1)).
809
Oil licences
25
(1)
This Part does not apply to an oil licence or an interest in an oil licence.
(2)
In subsection (1) “oil licence” means a UK oil licence or a foreign oil concession.
(3)
In this section—
“UK oil licence” means a licence under—
(a)
Part 1 of the Petroleum Act 1998 (c. 17) (“the 1998 Act”), or
30
(b)
the Petroleum Production (Northern Ireland) Act 1964 (c. 28
(N.I.)) (“the 1964 Act”),
authorising the winning of oil, and
“foreign oil concession” means any right that—
(a)
is a right to search for or win oil that exists in its natural
35
condition in a place to which neither the 1998 Act nor the 1964
Act applies, and
(b)
is conferred or exercisable (whether or not under a licence) in
relation to a particular area.
(4)
I n subsection (1) “interest in an oil licence” includes any entitlement under an
40
agreement to, or to a share of, oil or the proceeds of its sale if the agreement—
(a)
relates to oil from the whole or a part of the licensed area, and

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 10 — Excluded assets
387

(b)
was made before the extraction of the oil to which it relates.
(5)
In subsection (4)(a) “licensed area” means—
(a)
in relation to a UK oil licence, the area to which the licence applies, and
(b)
in relation to a foreign oil concession, the area in relation to which the
right to search for or win oil is conferred or exercisable under the
5
concession.
(6)
In this section “oil”—
(a)
in relation to a UK oil licence, means any substance won or capable of
being won under the authority of a licence granted under Part 1 of the
1998 Act or the 1964 Act, other than methane gas won in the course of
10
making and keeping mines safe, and
(b)
in relation to a foreign oil concession, means any petroleum (as defined
in section 1 of the 1998 Act).
Assets excluded from this Part except as respects royalties
810
Mutual trade or business
15
(1)
Except as respects royalties, this Part does not apply to an intangible fixed asset
so far as it is held for the purposes of any mutual trade or business.
(2)
But see section 902(1) and (2) (which disapplies subsection (1) in relation to
assets held for the purposes of life assurance business).
811
Sound recordings
20
(1)
Except as respects royalties, this Part does not apply to an intangible fixed asset
held by a company so far as it represents expenditure by the company on the
production or acquisition of the master version of a sound recording.
(2)
For this purpose—
(a)
“sound recording” does not include a film soundtrack,
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(b)
“master version” means master tape or master audio disc of the
recording, and
(c)
references to the master version include any rights in the master
version that are held or acquired with it.
812
Master versions of films
30
(1)
Except as respects royalties, this Part does not apply to an intangible fixed asset
held by a company so far as it represents expenditure by the company—
(a)
on the production of the original master version of a film that began
principal photography before 1 January 2007, or
(b)
on the acquisition before 1 October 2007 of such an original master
35
version.
(2)
In this section—
(a)
“film” has the same meaning as in Part 15 (see section 1181),
(b)
“original master version” means the original negative, tape or disc, and
(c)
references to the original master version of a film include—
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(i)
the original master version of the film soundtrack, if any, and

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 10 — Excluded assets
388

(ii)
any rights in the original master version that are held or
acquired with it.
813
Computer software treated as part of cost of related hardware
Except as respects royalties, this Part does not apply to an intangible fixed asset
held by a company so far as it represents expenditure by the company on
5
computer software that falls to be treated for accounting purposes as part of the
costs of the related hardware.
Assets excluded from this Part to the extent specified
814
Research and development
(1)
This section applies to an intangible fixed asset held by a company so far as it
10
represents expenditure by the company on research and development.
(2)
Chapter 2 (credits in respect of intangible fixed assets) does not apply to the
asset, except for—
(a)
section 721 (receipts recognised as they accrue), and
(b)
section 722 (receipts in respect of royalties so far as not dealt with under
15
section 721).
(3)
Chapter 3 (debits in respect of intangible fixed assets) does not apply to the
asset, except for section 732 (debit on reversal of previous accounting gain) so
far as that section relates to credits previously brought into account under
section 721 or 722.
20
(4)
Chapter 4 (realisation of intangible fixed assets) applies to the asset as if its cost
did not include any expenditure on research and development.
(5)
In this section “research and development” has the meaning given by section
837A of ICTA and includes oil and gas exploration and appraisal.
815
Election to exclude capital expenditure on software
25
(1)
If a company so elects in respect of capital expenditure by the company on
computer software, this section applies to an intangible fixed asset held by the
company so far as it represents the expenditure.
(2)
Chapter 2 (credits in respect of intangible fixed assets) does not apply to the
asset, except for—
30
(a)
section 721 (receipts recognised as they accrue), and
(b)
section 722 (receipts in respect of royalties so far as not dealt with under
section 721).
(3)
Chapter 3 (debits in respect of intangible fixed assets) does not apply to the
asset, except for section 732 (debit on reversal of previous accounting gain) so
35
far as that section relates to credits previously brought into account under
section 721 or 722.
(4)
Chapter 4 (realisation of intangible fixed assets) applies as if the cost of the
asset did not include any expenditure in respect of which an election under this
section has been made.
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
389

(5)
A credit is required to be brought into account under this Part in respect of the
asset only so far as the receipts to which the credit relates are not taken into
account in calculating disposal values under section 72 of CAA 2001.
(6)
The references in this section and section 816—
(a)
to capital expenditure, and
5
(b)
to the time when such expenditure is incurred,

have the same meaning as if this section were in CAA 2001.
(7)
Section 816 makes further provision about elections under this section.
(8)
See also section 903(1) (which extends elections under this section to capital
expenditure on some computer software by insurance companies).
10
816
Further provision about elections under section 815
(1)
An election under section 815 must specify the expenditure to which it relates.
(2)
The election must be made not more than 2 years after the end of the
accounting period in which the expenditure was incurred.
(3)
The election must be made in writing to an officer of Revenue and Customs.
15
(4)
The election is irrevocable.
Chapter 11
Transfer of business or trade
Introduction
817
Overview of Chapter
20
(1)
This Chapter contains provisions—
(a)
treating some transfers of assets as tax-neutral transfers for the
purposes of this Part (see sections 818, 820, 822, 824 and 826), and
(b)
giving relief in respect of the transfer of assets to a non-UK resident
company (see sections 827 to 830).
25
(2)
Sections 831 to 833 deal with the genuine commercial transaction requirement
(which applies in some cases for the treatment mentioned in subsection (1)(a)).
(3)
For the consequences of a transfer being tax-neutral for the purposes of this
Part, see section 776.
Tax-neutral transfers
30
818
Company reconstruction involving transfer of business
(1)
This section applies if—
(a)
a scheme of reconstruction involves the transfer of the whole or part of
the business of one company (“the transferor”) to another company
(“the transferee”), and
35