Corporation Tax Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
427

897
Application to pre-FA 2002 assets consisting of telecommunication rights
(1)
This Part applies to a pre-FA 2002 asset consisting of a licence or other right
within Chapter 10 of Part 2 of ITTOIA (certain telecommunication rights) (see
section 146 of that Act).
(2)
This Part applies in relation to such assets as if amounts brought into account
5
for tax purposes under Schedule 23 to FA 2000 in accounting periods ending
before 1 April 2002 had been so brought into account under this Part.
(3)
This subsection applies if the asset—
(a)
was acquired before the beginning of the first accounting period ending
on or after 1 April 2002, and
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(b)
was a chargeable intangible asset immediately after the beginning of
that period.
(4)
If subsection (3) applies, the asset is treated for the purposes of Chapter 7 (roll-
over relief on realisation and reinvestment) as if it had been a chargeable
intangible asset at all material times between its acquisition and the beginning
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of the first accounting period ending on or after 1 April 2002.
Roll-over relief for disposals of pre-FA 2002 assets
898
Relief where assets disposed of on or after 1 April 2002
(1)
This section applies if a company disposes of a pre-FA 2002 asset on or after 1
April 2002.
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(2)
Chapter 7 (roll-over relief in case of realisation and reinvestment) applies as
if—
(a)
references to the realisation of the old asset were references to its
disposal,
(b)
references to its being a chargeable intangible asset were references to
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its being a chargeable asset within TCGA 1992 (see section 900),
(c)
references to the proceeds of its realisation were references to the net
proceeds of disposal under that Act (see subsection (3)), and
(d)
references to its cost recognised for tax purposes were references to the
cost under that Act (see subsection (4)).
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(3)
For the purposes of subsection (2)(c) the net proceeds of disposal under TCGA
1992 are taken to be the amount or value of the consideration for the disposal,
less any incidental costs of making the disposal that would be allowable as a
deduction under section 38(1)(c) of that Act.
(4)
For the purposes of subsection (2)(d) the cost under TCGA 1992 is taken to be
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an amount equal to the difference between—
(a)
the net proceeds of disposal (as defined in subsection (3)), and
(b)
the amount of the chargeable gain on the disposal.
(5)
Section 850 (part realisation involving related party acquisition: exclusion of
roll-over relief) does not apply in a case where Chapter 7 applies because of this
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section.
(6)
References in this section to the disposal of an asset have the same meaning as
in TCGA 1992.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
428

899
Relief where degrouping charge on asset arises on or after 1 April 2002
(1)
This section applies if—
(a)
a company is treated under section 179(3) or (6) of TCGA 1992
(degrouping charge) as having sold and reacquired a pre-FA 2002 asset,
and
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(b)
under section 179(4) or (8) of that Act the gain is treated as accruing on
or after 1 April 2002.
(2)
Chapter 7 (roll-over relief in case of realisation and reinvestment) applies as
specified in section 898(2) and with the additional modifications specified in
subsections (3) to (5).
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(3)
In section 755 (conditions relating to the old asset and its realisation), for the
references to the old asset being a chargeable intangible asset throughout the
period during which it was held by the company substitute references to its
being a chargeable asset within TCGA 1992 throughout the period during
which it was held by the company referred to in section 179 of that Act as
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“company B”.
(4)
In section 756(1) (conditions relating to expenditure on other assets), for the
references to the date of realisation of the old asset substitute references—
(a)
in a case within section 179(3) of TCGA 1992, to the time at which the
gain is treated as accruing under section 179(4) of that Act, and
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(b)
in a case within subsection 179(6) of that Act, to the time at which the
gain is treated as accruing under section 179(8) of that Act.
(5)
For references to the proceeds of realisation substitute references to the amount
of the consideration for which the company is treated under TCGA 1992 as
having sold and reacquired the asset.
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(6)
For the meaning of “chargeable asset within TCGA 1992”, see section 900.
(7)
Section 850 (part realisation involving related party: exclusion of roll-over
relief) does not apply in a case where Chapter 7 applies because of this section.
900
Meaning of “chargeable asset within TCGA” in sections 898 and 899
(1)
For the purposes of sections 898 and 899 an asset is a chargeable asset within
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TCGA 1992 in relation to a company at any time if—
(a)
any gain accruing to the company on the disposal of it at that time
would be a chargeable gain within the meaning of that Act,
(b)
condition A or condition B is met in relation to the company, and
(c)
double tax relief is not available to the company at that time.
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(2)
Condition A is that at that time the company is UK resident or ordinarily UK
resident.
(3)
Condition B is that the gain would form part of the company’s chargeable
profits for corporation tax purposes as a result of section 10B of TCGA 1992
(non-resident company with United Kingdom permanent establishment).
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(4)
For the purposes of subsection (1) double tax relief is available to the company
if it would be treated for the purposes of any double taxation relief
arrangements as not liable in the United Kingdom to tax on any gain accruing
to it on a disposal of the asset.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 17 — Insurance companies
429

(5)
References in this section to the disposal of an asset have the same meaning as
in TCGA 1992.
Chapter 17
Insurance companies
Effect of application of the I minus E basis: non-trading amounts
5
901
Effect of application of the I minus E basis: non-trading amounts
(1)
The effect of applying the I minus E basis for an accounting period in relation
to life assurance business carried on by an insurance company is as follows.
(2)
Credits or debits falling to be brought into account under this Part in respect of
intangible fixed assets of the company referable to that business are not
10
brought into account as mentioned in section 747 (assets held for purposes of
trade).
(3)
Instead, those credits or debits are brought into account under section 751
(non-trading gains and losses) as non-trading credits or, as the case may be,
non-trading debits.
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Excluded assets and computer software
902
Excluded assets
(1)
Except as respects royalties, this Part does not apply to an intangible fixed asset
so far as it is held by an insurance company for the purposes of its life
assurance business.
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(2)
Accordingly, section 810(1) (which makes provision in the same terms as
subsection (1) in relation to assets held for the purposes of any mutual trade or
business) does not apply in relation to assets held for the purposes of life
assurance business.
(3)
Subsection (1) does not apply to computer software.
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(4)
Sections 801 and 802 apply so far as assets are excluded by this section as they
apply so far as assets are excluded because of sections 810 to 813.
903
Elections to exclude capital expenditure on computer software
(1)
An insurance company that carries on life assurance business may make an
election under section 815 (election to exclude capital expenditure on software)
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in respect of so much of any capital expenditure on computer software as is not
referable to its basic life assurance and general annuity business.
(2)
In subsection (1) “capital expenditure” has the same meaning as if this section
were in CAA 2001.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 17 — Insurance companies
430

Miscellaneous
904
Transfers of life assurance business: transfers of assets treated as tax-neutral
(1)
A transfer of intangible fixed assets to which this section applies is tax-neutral
for the purposes of this Part (see section 776).
(2)
This section applies to a transfer of intangible fixed assets if—
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(a)
the assets are included in a transfer within subsection (3),
(b)
immediately before the transfer the intangible fixed assets are
chargeable intangible assets in relation to the company making the
transfer, and
(c)
immediately after the transfer the intangible fixed assets are chargeable
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intangible assets in relation to the company to which the transfer is
made.
(3)
A transfer is within this subsection if it is—
(a)
a transfer of business consisting of the effecting or carrying out of long-
term business which has effect under an insurance business transfer
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scheme, or
(b)
a qualifying overseas transfer.
905
Pre-FA 2002 assets: Lloyd’s syndicate capacity
(1)
The general rule in section 882 (this Part not to apply to pre-FA 2002 assets)
does not apply if the intangible fixed asset consists of the rights of a member of
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Lloyd’s under a syndicate within the meaning of Chapter 5 of Part 4 of FA 1994
(taxation of corporate members of Lloyd’s).
(2)
This Part applies in relation to the asset as respects amounts to be brought into
account for tax purposes in accounting periods ending on or after 1 April 2002.
(3)
For the purposes of section 729(5) (writing down on accounting basis:
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calculation of amount of debit for tax purposes) as it applies to the first
accounting period ending on or after 1 April 2002, the tax written down value
of the asset must be calculated under section 742 in accordance with subsection
(4).
(4)
That value must be calculated as if the debits to be deducted under section 742
30
included all accounting losses previously recognised in respect of the asset.
(5)
It does not matter for the purposes of subsection (4) if those accounting losses
previously gave rise to a deduction for tax purposes.
(6)
This subsection applies if an asset within subsection (1)—
(a)
was acquired before the beginning of the first accounting period ending
35
on or after 1 April 2002, and
(b)
is a chargeable intangible asset immediately after the beginning of that
period.
(7)
If subsection (6) applies, the asset is treated for the purposes of Chapter 7 (roll-
over relief on realisation and reinvestment) as if it had been a chargeable
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intangible asset at all material times between its acquisition and the beginning
of the first accounting period ending on or after 1 April 2002.

Corporation Tax Bill
Part 9 — Intellectual property: know-how and patents
Chapter 1 — Introduction
431

(8)
For the purposes of this section, an asset is treated as acquired at the same time
as it would be treated as acquired for the purposes of section 882 (see sections
883 to 885).
Chapter 18
Priority rules
5
906
Priority of this Part for corporation tax purposes
(1)
The amounts to be brought into account in accordance with this Part in respect
of any matter are the only amounts to be brought into account for corporation
tax purposes in respect of that matter.
(2)
Subsection (1) is subject to any indication to the contrary.
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(3)
In particular, see—
(a)
section 1308 (expenditure brought into account in determining value of
intangible asset), and
(b)
section 83(2ZA) of FA 1989 (life assurance: receipts to be taken into
account).
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Part 9
Intellectual property: know-how and patents
Chapter 1
Introduction
20
907
Overview of Part
(1)
This Part applies the charge to corporation tax on income to—
(a)
profits from disposals of know-how (see Chapter 2), and
(b)
profits from sales of patent rights (see Chapter 3).
(2)
This Part also provides for relief from corporation tax on patent income (see
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Chapter 4).
(3)
Chapter 5 contains supplementary provision relevant to Chapters 2 to 4.
(4)
This Part needs to be read in the light of Part 8 (intangible fixed assets).
(5)
See in particular the following provisions of Part 8, which are relevant to the
application of that Part—
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(a)
section 713 (meaning of “intangible fixed asset”),
(b)
Chapter 16 (which limits the application of Part 8 to assets which are
not pre-FA 2002 assets within the meaning of section 881), and
(c)
section 906 (which contains a rule about the priority of Part 8 for
corporation tax purposes).
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Corporation Tax Bill
Part 9 — Intellectual property: know-how and patents
Chapter 2 — Disposals of know-how
432

Chapter 2
Disposals of know-how
908
Charge to tax on profits from disposals of know-how
(1)
The charge to corporation tax on income applies to profits arising where
consideration is received by a company—
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(a)
for the disposal of know-how, or
(b)
for giving, or wholly or partly fulfilling, an undertaking which—
(i)
is given in connection with a disposal of know-how, and
(ii)
restricts or is designed to restrict any person’s activities in any
way.
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(2)
For the purposes of subsection (1)(b), it does not matter whether or not the
undertaking is legally enforceable.
(3)
Subsection (1) is subject to the exceptions in section 909.
(4)
In this Chapter “know-how” means any industrial information or techniques
likely to assist in—
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(a)
manufacturing or processing goods or materials,
(b)
working a source of mineral deposits (including searching for,
discovering or testing mineral deposits or obtaining access to them), or
(c)
carrying out any agricultural, forestry or fishing operations.
(5)
In subsection (4)—
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(a)
“mineral deposits” includes any natural deposits capable of being lifted
or extracted from the earth and for this purpose geothermal energy is
treated as a natural deposit, and
(b)
“source of mineral deposits” includes a mine, an oil well and a source
of geothermal energy.
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909
Exceptions to charge under section 908
(1)
Section 908 does not apply in the following cases.
(2)
Case A is if the consideration is brought into account under section 462 of CAA
2001 (disposal values).
(3)
Case B is if the consideration is dealt with in relation to the company receiving
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it as a trading receipt under section 177(2) (disposal of know-how if trade
continues to be carried on).
(4)
Case C is if the consideration is dealt with in relation to the person receiving it
as a capital receipt for goodwill under section 178(2) (disposal of know-how as
part of disposal of all or part of a trade).
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(5)
Case D is if the disposal of the know-how is by way of a sale and—
(a)
the buyer is a body of persons over which the seller has control,
(b)
the seller is a body of persons over which the buyer has control, or
(c)
the buyer and the seller are both bodies of persons and another person
has control over both of them.
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(6)
In subsection (5) “body of persons” includes a firm.