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 16 — Pre-FA 2002 assets etc
419

(d)
this Part applies in relation to each of the notional original assets and its
corresponding resulting asset accordingly.
(5)
For the purposes of subsection (4)(c) the appropriate proportion of every
amount falling to be taken into account in relation to the original undivided
asset that is to be attributed to each notional original asset is found by reference
5
to the notional original asset’s corresponding resulting asset.
(6)
The appropriate proportion in relation to each resulting asset is—

where—
AVL is the accounting value of that resulting asset at the beginning of the
later period, and
10
TAVL is the sum of the accounting values of all the resulting assets at the
beginning of that period.
Supplementary
878
Exclusion of credits or debits brought into account under other provisions
(1)
A credit or debit is not required to be brought into account under this Chapter
15
so far as a credit or debit representing the accounting difference in question is
brought into account for tax purposes under a provision specified in
subsection (2).
(2)
Those provisions are—
(a)
section 723 (revaluation),
20
(b)
section 725 (reversal of previous accounting loss), or
(c)
section 732 (reversal of previous accounting gain).
879
Subsequent events affecting asset subject to adjustment under this Chapter
(1)
On a further change of accounting policy affecting an intangible fixed asset in
relation to which this Chapter has applied, the previous provisions of this
25
Chapter apply again.
(2)
On a subsequent part realisation affecting the asset in question, section 744
(effect of part realisation of asset) applies.
Chapter 16
Pre-FA 2002 assets etc
30
Introduction
880
Overview of Chapter
This Chapter—

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
420

(a)
sets out a general rule limiting the application of this Part to certain
assets (see section 882(1): application of this Part to assets created or
acquired on or after 1 April 2002),
(b)
makes provision about when assets are treated as created or acquired
(see sections 883 to 889),
5
(c)
makes special provision about particular kinds of assets (see sections
890 to 897), and
(d)
provides how roll-over relief is to apply in some circumstances where
assets excluded by the general rule mentioned in paragraph (a) are
involved (see sections 898 and 899).
10
881
Meaning of “pre-FA 2002 assets”
Intangible fixed assets which are excluded from the application of this Part by
the general rule mentioned in section 880(a) (subject to any express provision
to the contrary) are referred to in this Part as “pre-FA 2002 assets”.
General rule
15
882
Application of this Part to assets created or acquired on or after 1 April 2002
(1)
The general rule is that this Part applies only to intangible fixed assets of a
company (“the company”) that—
(a)
are created by the company on or after 1 April 2002,
(b)
are acquired by the company on or after that date from a person who at
20
the time of the acquisition is not a related party in relation to the
company, or
(c)
are acquired by the company on or after that date in case A, B or C from
a person who at the time of the acquisition is a related party in relation
to the company.
25
(2)
For provisions explaining when assets are treated as created or acquired, see
sections 883 to 889.
(3)
Case A is where the asset is acquired from a company in relation to which the
asset was a chargeable intangible asset immediately before the acquisition.
(4)
Case B is where the asset is acquired from a person (“the intermediary”) who
30
acquired the asset on or after 1 April 2002 from a third person—
(a)
who was not at the time of the intermediary’s acquisition a related
party in relation—
(i)
to the intermediary, or
(ii)
if the intermediary was not a company, to a company in relation
35
to which the intermediary was a related party, and
(b)
who is not, at the time of the acquisition by the company, a related
party in relation to the company.
(5)
Case C is where the asset was created on or after 1 April 2002 by the person
from whom it is acquired or any other person.
40
(6)
The general rule in subsection (1) is subject to—
(a)
section 890 (fungible assets: application of section 858),
(b)
section 892 (certain assets acquired on transfer of a business),
(c)
section 893 (assets whose value derives from pre-FA 2002 assets),

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
421

(d)
section 895 (assets acquired in connection with disposals of pre-FA 2002
assets),
(e)
section 897 (application to pre-FA 2002 assets consisting of
telecommunication rights),
(f)
sections 898 and 899 (application of roll-over relief in relation to some
5
pre-FA 2002 assets), and
(g)
section 905 (pre-FA 2002 assets: Lloyd’s syndicate capacity).
(7)
This section does not restrict the application of this Part in accordance with
section 896 (application to royalties) (but see section 896(3)).
When assets are treated as created or acquired
10
883
Assets treated as created or acquired when expenditure incurred
(1)
This section—
(a)
applies for the purposes of section 882 (application of this Part to assets
created or acquired on or after 1 April 2002), and
(b)
applies to all intangible assets except those to which the provisions
15
specified in subsection (2) apply.
(2)
The provisions referred to in subsection (1)(b) are—
(a)
section 884 (internally-generated goodwill: time of creation),
(b)
section 885 (certain other internally-generated assets: time of creation),
and
20
(c)
section 886 (assets representing production expenditure on films: time
of creation).
(3)
An intangible asset to which this section applies is treated as created or
acquired on or after 1 April 2002 so far as expenditure on its creation or
acquisition is incurred on or after that date.
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(4)
As to whether expenditure on the creation or acquisition of the asset is incurred
on or after 1 April 2002, see sections 887 to 889.
(5)
If only part of the expenditure on the creation or acquisition of the asset is
incurred on or after 1 April 2002—
(a)
this Part applies as if there were a separate asset representing the
30
expenditure so incurred, and
(b)
the alternative enactments apply as if there were a separate asset
representing the expenditure not so incurred.
(6)
In subsection (5) “the alternative enactments” means the enactments that apply
where this Part does not apply.
35
(7)
Any apportionment necessary for the purposes of subsection (5) must be made
on a just and reasonable basis.
884
Internally-generated goodwill: time of creation
For the purposes of section 882 (application of this Part to assets created or
acquired on or after 1 April 2002) internally-generated goodwill is treated as
40
created before (and not on or after) 1 April 2002 if the business in question was
carried on at any time before 1 April 2002 by the company or a related party.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
422

885
Certain other internally-generated assets: time of creation
(1)
This section—
(a)
applies for the purposes of section 882 (application of this Part to assets
created or acquired on or after 1 April 2002), and
(b)
applies to an internally-generated asset representing non-qualifying
5
expenditure.
(2)
In this section “non-qualifying expenditure” means expenditure that under the
law as it was before 1 April 2002 is not qualifying expenditure for the purposes
of any allowance under CAA 2001.
(3)
If only part of the expenditure on the creation or acquisition of the asset is non-
10
qualifying expenditure, this Part applies as if there were separate assets
representing the non-qualifying expenditure and the other expenditure.
(4)
If this Part does not apply to the asset representing the non-qualifying
expenditure, the alternative enactments also apply as if there were a separate
asset representing that expenditure.
15
(5)
In subsection (4) “the alternative enactments” means the enactments that apply
where this Part does not apply.
(6)
Any apportionment necessary for the purposes of subsection (3) or (4) must be
made on a just and reasonable basis.
(7)
An asset to which this section applies is treated for the purposes of section 882
20
as created before (and not on or after) 1 April 2002 if the asset in question was
held at any time before that date by the company or a related party.
886
Assets representing production expenditure on films: time of creation
(1)
In determining for the purposes of this Part whether an asset representing
production expenditure on a film was created before 1 April 2002 or on or after
25
that date, the asset is treated as created when the film is completed.
(2)
In this section—
(a)
“completed” has the same meaning as in Part 15 (see section 1181(5)),
(b)
“film” has the same meaning as in that Part (see section 1181), and
(c)
“production expenditure” has the same meaning as in that Part (see
30
section 1184).
When expenditure treated as incurred
887
General rule
(1)
For the purposes of section 883 (assets treated as created or acquired when
expenditure incurred) the general rule is that expenditure on the acquisition of
35
an asset is treated as incurred when it is recognised for accounting purposes.
(2)
This is subject to—
section 888 (cases where chargeable gains rule applies), and
section 889 (cases where capital allowances general rule applies).