|
| |
|
169 | Cost to buyer of stock valued on sale basis of valuation |
| |
(1) | This section applies for the purpose of calculating the profits of the trade |
| |
carried on by the buyer of trading stock. |
| |
(2) | If the value of the stock is determined in accordance with— |
| |
(a) | section 164(3) or sections 165 to 167 (sale basis of valuation), or |
| 5 |
(b) | section 175(3) or sections 176 to 178 of ITTOIA 2005 (corresponding |
| |
| |
| the cost of the stock to the buyer is taken to be the value as so determined. |
| |
170 | Meaning of “sale” and related expressions |
| |
(1) | In sections 164 to 167 (except in section 167(5)) references to a sale include a |
| 10 |
transfer for valuable consideration. |
| |
(2) | In relation to a transfer which is not a sale— |
| |
“amount realised on the sale” means the value of the consideration given |
| |
| |
“buyer” means the person to whom the transfer is made, and |
| 15 |
“seller” means the person who makes the transfer. |
| |
171 | Determination of questions |
| |
Any question arising under section 164(3) or sections 165 to 167 (sale basis of |
| |
valuation of trading stock) must be determined in the same way as an appeal. |
| |
| 20 |
Deductions from profits: unremittable amounts |
| |
172 | Application of Chapter |
| |
(1) | This Chapter applies if— |
| |
(a) | an amount received by, or owed to, a company carrying on a trade (“the |
| |
trader”) is brought into account as a receipt in calculating the profits of |
| 25 |
| |
(b) | the amount is paid or owed in a territory outside the United Kingdom, |
| |
| |
(c) | some or all of the amount is unremittable. |
| |
(2) | An amount received is unremittable if it cannot be transferred to the United |
| 30 |
Kingdom merely because of foreign exchange restrictions. |
| |
(3) | An amount owed is unremittable if it cannot be paid in the United Kingdom |
| |
| |
(a) | it temporarily cannot be paid in the territory in which it is owed merely |
| |
because of foreign exchange restrictions, or |
| 35 |
(b) | it can be paid in that territory but, if it were paid there, the amount paid |
| |
would not be transferable to the United Kingdom merely because of |
| |
foreign exchange restrictions. |
| |
(4) | “Foreign exchange restrictions” are restrictions imposed by any of the |
| |
| 40 |
|
| |
|
| |
|
(a) | the laws of the territory where the amount is paid or owed, |
| |
(b) | executive action of its government, and |
| |
(c) | the impossibility of obtaining there currency that could be transferred |
| |
| |
(5) | Section 464(1) (matters to be brought into account in the case of loan |
| 5 |
relationships) does not prevent any amount from being brought into account |
| |
in accordance with section 173 or 175. |
| |
173 | Relief for unremittable amounts |
| |
| |
(a) | the trader has profits from the trade in a period of account, and |
| 10 |
(b) | an unremittable amount has been brought into account as a receipt for |
| |
| |
| a deduction of the amount is allowed from those profits (but see subsection |
| |
| |
(2) | If the trader has profits from the trade in a period of account and the total of— |
| 15 |
(a) | any unremittable amounts brought into account as receipts for that |
| |
| |
(b) | any amount carried forward under this subsection or subsection (3) |
| |
from the previous period of account, |
| |
| exceeds the amount of those profits, the excess may be carried forward to the |
| 20 |
| |
(3) | If the trader does not have profits from the trade in a period of account and an |
| |
unremittable amount has been brought into account as a receipt for that period, |
| |
| |
(a) | any unremittable amounts brought into account as receipts for that |
| 25 |
| |
(b) | any amount carried forward under this subsection or subsection (2) |
| |
from the previous period of account, |
| |
| may be carried forward to the next period of account. |
| |
(4) | If an amount is carried forward under this section to a period of account in |
| 30 |
which the trader has profits from the trade, a deduction of the amount is |
| |
allowed from those profits (but see subsection (5)). |
| |
(5) | The total amount deducted under this section from the profits from a trade in |
| |
a period of account must not exceed the amount of the profits. |
| |
174 | Restrictions on relief |
| 35 |
(1) | No deduction is allowed under section 173 in relation to an amount so far as— |
| |
(a) | it is used to finance expenditure or investment outside the United |
| |
| |
(b) | it is applied outside the United Kingdom in another way. |
| |
(2) | No deduction is allowed under section 173 in relation to an amount owed so |
| 40 |
far as a payment under a contract of insurance has been received in relation to |
| |
| |
|
| |
|
| |
|
(3) | No deduction is allowed under section 173 in relation to an amount brought |
| |
into account in calculating profits if relief under section 1275 (unremittable |
| |
income) may be claimed in relation to that amount. |
| |
| |
(1) | This section applies if— |
| 5 |
(a) | some or all of an unremittable amount has been deducted from profits |
| |
| |
(b) | any of the following events occurs. |
| |
| |
(a) | the amount or part of it ceases to be unremittable, |
| 10 |
(b) | an allowable provision for impairment loss is made in respect of the |
| |
| |
(c) | the amount or part of it is used to finance expenditure or investment |
| |
outside the United Kingdom, |
| |
(d) | the amount or part of it is applied outside the United Kingdom in |
| 15 |
| |
(e) | the amount or part of it is exchanged for, or discharged by, an amount |
| |
that is not unremittable, and |
| |
(f) | if the amount is an amount owed, a payment under a contract of |
| |
insurance is received in relation to the amount or part of it. |
| 20 |
(3) | The amount or the part of it in question is brought into account as a receipt in |
| |
calculating the profits of the trade of the period of account in which the event |
| |
occurs, but only so far as— |
| |
(a) | it has been deducted from profits under section 173, and |
| |
(b) | it has not already been brought into account as a receipt in calculating |
| 25 |
the profits of the trade as a result of this section. |
| |
(4) | If the event is the receipt of a payment under a contract of insurance, the |
| |
amount brought into account as a receipt must not exceed the amount of the |
| |
| |
(5) | In subsection (2)(b) “allowable provision for impairment loss” means either— |
| 30 |
(a) | a debit in respect of the impairment of a financial asset (see section |
| |
476(1)) which is brought into account under Part 5 (loan relationships), |
| |
| |
(b) | a provision in respect of which a deduction is allowable under section |
| |
| 35 |
| |
Disposal and acquisition of know-how |
| |
176 | Meaning of “know-how” etc |
| |
(1) | In this Chapter “know-how” means any industrial information or techniques |
| |
| 40 |
(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. |
| |
| |
“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 |
| 5 |
“source of mineral deposits” includes a mine, an oil well and a source of |
| |
| |
(3) | For the purposes of this Chapter any consideration received for giving, or |
| |
wholly or partly fulfilling, an undertaking which— |
| |
(a) | is given in connection with a disposal of know-how, and |
| 10 |
(b) | restricts, or is designed to restrict, any person’s activities in any way, |
| |
| is treated as consideration received for the disposal of the know-how. |
| |
(4) | It does not matter whether or not the undertaking is legally enforceable. |
| |
(5) | For the purposes of this Chapter references to a sale of know-how include an |
| |
exchange of know-how and any provision of this Chapter referring to a sale |
| 15 |
has effect with the necessary modifications. |
| |
(6) | Those modifications include, in particular, reading references to the proceeds |
| |
of sale and to the price as including the consideration for the exchange. |
| |
177 | Disposal of know-how if trade continues to be carried on |
| |
(1) | This section applies if— |
| 20 |
(a) | a company carrying on a trade receives consideration for the disposal |
| |
of know-how which has been used in the trade, |
| |
(b) | the company continues to carry on the trade after the disposal, and |
| |
(c) | neither section 178 (disposal of know-how as part of disposal of all or |
| |
part of a trade) nor section 179 (seller controlled by buyer etc) applies. |
| 25 |
(2) | The amount or value of the consideration is treated for corporation tax |
| |
purposes as a trading receipt, except so far as it is brought into account under |
| |
section 462 of CAA 2001 (disposal values). |
| |
(3) | If the know-how is sold together with other property, the net proceeds of the |
| |
sale of the know-how are treated as being so much of the net proceeds of the |
| 30 |
sale of all the property as, on a just and reasonable apportionment, is |
| |
attributable to the know-how. |
| |
(4) | For this purpose all property sold as a result of one bargain is treated as sold |
| |
| |
(a) | separate prices are, or purport to be, agreed for separate items of that |
| 35 |
| |
(b) | there are, or purport to be, separate sales of separate items of that |
| |
| |
(5) | Any question about the way in which a sum is to be apportioned under this |
| |
section must be determined in accordance with section 563(2) to (6) of CAA |
| 40 |
2001 (procedure for determining certain questions affecting two or more |
| |
persons) if it materially affects two or more taxpayers. |
| |
(6) | For this purpose a question materially affects two or more taxpayers if, at the |
| |
time when the question falls to be determined, it appears that the |
| |
|
| |
|
| |
|
determination is material to the liability to tax (for whatever period) of two or |
| |
| |
178 | Disposal of know-how as part of disposal of all or part of a trade |
| |
(1) | This section applies if — |
| |
(a) | a person carrying on a trade receives consideration for the disposal of |
| 5 |
know-how which has been used in the trade, and |
| |
(b) | the know-how is disposed of as part of the disposal of all or part of the |
| |
| |
(2) | If the person disposing of the know-how is within the charge to corporation |
| |
tax, the consideration is treated for corporation tax purposes as a capital receipt |
| 10 |
| |
(3) | If the person acquiring the know-how— |
| |
(a) | is within the charge to corporation tax, and |
| |
(b) | provided the consideration, |
| |
| the consideration is treated for corporation tax purposes as a capital payment |
| 15 |
| |
(4) | But the consideration is not treated for corporation tax purposes as a capital |
| |
payment for goodwill if, before the acquisition, the trade was carried on wholly |
| |
outside the United Kingdom. |
| |
(5) | If the person disposing of the know-how is within the charge to corporation |
| 20 |
| |
| |
(b) | the person acquiring the know-how (whether or not within the charge |
| |
| |
| may jointly elect for this section not to apply (but see section 179). |
| 25 |
(6) | The election must be made within two years of the disposal. |
| |
| |
(a) | an election is made under section 194 of ITTOIA 2005 (corresponding |
| |
income tax provision), and |
| |
(b) | the person making the acquisition mentioned in that section is within |
| 30 |
the charge to corporation tax, |
| |
| the persons making the election under that section are treated as also making |
| |
an election under this section (even though the person disposing of the know- |
| |
how is not within the charge to corporation tax). |
| |
179 | Seller controlled by buyer etc |
| 35 |
(1) | This section applies if a disposal of know-how is by way of sale and— |
| |
(a) | the seller is a body of persons over which the buyer has control, |
| |
(b) | the buyer is a body of persons over which the seller has control, or |
| |
(c) | both the seller and the buyer are bodies of persons and another person |
| |
has control over both of them. |
| 40 |
| |
(a) | section 177 does not apply, and |
| |
(b) | no election may be made under section 178. |
| |
|
| |
|
| |
|
(3) | For the purposes of this section “body of persons” includes a firm. |
| |
| |
Adjustment on change of basis |
| |
Adjustment on change of basis |
| |
180 | Application of Chapter |
| 5 |
(1) | This Chapter applies if— |
| |
(a) | a company carrying on a trade changes, from one period of account to |
| |
the next, the basis on which profits of the trade are calculated for |
| |
corporation tax purposes, |
| |
(b) | the old basis accorded with the law or practice applicable in relation to |
| 10 |
the period of account before the change, and |
| |
(c) | the new basis accords with the law and practice applicable in relation |
| |
to the period of account after the change. |
| |
(2) | The practice applicable in any case means the accepted practice in cases of that |
| |
description as to how profits of a trade should be calculated for corporation tax |
| 15 |
| |
(3) | A company changes the basis on which profits of a trade are calculated for |
| |
corporation tax purposes if the company makes— |
| |
(a) | a relevant change of accounting approach (see subsection (4)), or |
| |
(b) | a change in the tax adjustments applied (see subsections (5) and (6)). |
| 20 |
(4) | A “relevant change of accounting approach” means— |
| |
(a) | a change of accounting principle or practice that, in accordance with |
| |
generally accepted accounting practice, gives rise to a prior period |
| |
| |
(b) | a change from using UK generally accepted accounting practice to |
| 25 |
using generally accepted accounting practice with respect to accounts |
| |
drawn up in accordance with international accounting standards. |
| |
(5) | A “tax adjustment” means any adjustment required or authorised by law in |
| |
calculating profits of a trade for corporation tax purposes. |
| |
(6) | A “change in the tax adjustments applied”— |
| 30 |
(a) | does not include a change made in order to comply with amending |
| |
legislation not applicable to the previous period of account, but |
| |
(b) | includes a change resulting from a change of view as to what is |
| |
required or authorised by law or as to whether any adjustment is so |
| |
| 35 |
181 | Giving effect to positive and negative adjustments |
| |
(1) | An amount by way of adjustment must be calculated in accordance with |
| |
| |
(2) | If the amount produced by the calculation is positive— |
| |
(a) | the amount is brought into account as a receipt in calculating the profits |
| 40 |
| |
|
| |
|
| |
|
(b) | the receipt is treated as arising on the first day of the first period of |
| |
account for which the new basis is adopted. |
| |
(3) | If the amount produced by the calculation is negative— |
| |
(a) | a deduction is allowed for the amount as an expense of the trade in |
| |
calculating the profits of the trade, and |
| 5 |
(b) | the expense is treated as arising on the first day of the first period of |
| |
account for which the new basis is adopted. |
| |
(4) | This section is subject to— |
| |
(a) | section 183 (no adjustment for certain expenses previously brought into |
| |
| 10 |
(b) | section 184 (cases where adjustment not required until assets realised |
| |
| |
(c) | section 185 (change from realisation basis to mark to market). |
| |
182 | Calculation of the adjustment |
| |
The amount of the adjustment is calculated as follows. |
| 15 |
| |
Add together any amounts representing the extent to which, comparing the |
| |
two bases, profits were understated (or losses overstated) on the old basis. |
| |
| |
| | | | 20 | | | Receipts which on the new basis would have been brought |
| | | | | into account in calculating the profits of a period of account |
| | | | | before the change, so far as they were not so brought into |
| | | | | | | | | | Expenses which on the new basis fall to be brought into |
| | 25 | | | account in calculating the profits of a period of account after |
| | | | | the change, so far as they were brought into account in |
| | | | | calculating the profits of a period of account before the |
| | | | | | | | | | Deductions in respect of opening trading stock or opening |
| | 30 | | | work in progress in the first period of account on the new |
| | | | | | | | | | (a) | are not matched by credits in respect of closing |
| | | | | trading stock or closing work in progress in the last |
| | | | | period of account before the change, or |
| | 35 | | | (b) | are calculated on a different basis that if used to |
| | | | | calculate those credits would have given a higher |
| | | | | | | | | | Amounts recognised for accounting purposes in respect of |
| | | | | depreciation in the last period of account before the change, |
| | 40 | | | so far as they were not the subject of an adjustment for |
| | | | | corporation tax purposes, where such an adjustment would |
| | | | | be required on the new basis. |
| | |
|
|
| |
|