|
| |
|
(g) | Chapter 17 (insurance companies). |
| |
| |
| |
(1) | In this Part “intangible asset” has the meaning it has for accounting purposes. |
| |
(2) | In particular, “intangible asset” includes intellectual property. |
| 5 |
(3) | For this purpose “intellectual property” means— |
| |
(a) | any patent, trade mark, registered design, copyright or design right, |
| |
plant breeders’ rights or rights under section 7 of the Plant Varieties Act |
| |
| |
(b) | any right under the law of a country or territory outside the United |
| 10 |
Kingdom corresponding or similar to a right within paragraph (a), |
| |
(c) | any information or technique not protected by a right within paragraph |
| |
(a) or (b) but having industrial, commercial or other economic value, or |
| |
(d) | any licence or other right in respect of anything within paragraph (a), |
| |
| 15 |
(4) | This section is subject to Chapter 10 (excluded assets). |
| |
713 | “Intangible fixed asset” |
| |
(1) | In this Part an “intangible fixed asset”, in relation to a company, means an |
| |
intangible asset acquired or created by the company for use on a continuing |
| |
basis in the course of the company’s activities. |
| 20 |
(2) | In this Part “intangible fixed asset” includes an option or other right— |
| |
(a) | to acquire an intangible asset that would be a fixed asset if it were |
| |
| |
(b) | to dispose of an intangible fixed asset. |
| |
(3) | This Part applies to an intangible fixed asset whether or not it is capitalised in |
| 25 |
| |
(4) | Subsection (3) is subject to any indication to the contrary. |
| |
(5) | This section is subject to any such provision of regulations under section 854 |
| |
(finance leasing etc) as is mentioned in section 855(1) (assets to be treated as |
| |
intangible fixed assets of finance lessor). |
| 30 |
| |
In this Part “royalty” means a royalty in respect of the enjoyment or exercise of |
| |
rights that constitute an intangible fixed asset. |
| |
| |
715 | Application of this Part to goodwill |
| 35 |
(1) | This Part applies to goodwill as it applies to an intangible fixed asset. |
| |
(2) | Subsection (1) is subject to any indication to the contrary. |
| |
|
| |
|
| |
|
(3) | In this Part “goodwill” has the meaning it has for accounting purposes. |
| |
Accounting rules and definitions |
| |
716 | “Recognised” amounts and “GAAP-compliant accounts” |
| |
(1) | References in this Part to an amount “recognised” in determining a company’s |
| |
profit or loss for a period are to— |
| 5 |
(a) | an amount recognised in— |
| |
(i) | the company’s profit and loss account, income statement or |
| |
statement of comprehensive income for that period, |
| |
(ii) | the company’s statement of total recognised gains and losses, |
| |
statement of recognised income and expense, statement of |
| 10 |
changes in equity or statement of income and retained earnings |
| |
| |
(iii) | any other statement of items brought into account in calculating |
| |
the company’s profits and losses for that period, and |
| |
(b) | an amount that would have been so recognised if such an account or |
| 15 |
statement had been drawn up for that period in accordance with |
| |
generally accepted accounting practice. |
| |
(2) | An amount that in accordance with generally accepted accounting practice is |
| |
shown as a prior period adjustment in any such statement as is mentioned in |
| |
subsection (1) must be brought into account for the purposes of this Part in |
| 20 |
calculating the company’s profits and losses for the period to which the |
| |
| |
(3) | Subsection (2) does not apply to an amount recognised for accounting |
| |
purposes by way of correction of a fundamental error. |
| |
(4) | In this Part “GAAP-compliant accounts” means accounts drawn up in |
| 25 |
accordance with generally accepted accounting practice. |
| |
(5) | In the case of a company that is a member of a group, see also section 718. |
| |
717 | Companies without GAAP-compliant accounts |
| |
| |
(a) | draws up accounts that are not GAAP-compliant accounts, or |
| 30 |
(b) | does not draw up accounts at all, |
| |
| this Part applies as if GAAP-compliant accounts had been drawn up. |
| |
(2) | References in this Part to amounts recognised for accounting purposes are |
| |
references to the amounts which would have been recognised if GAAP- |
| |
compliant accounts had been drawn up for the period of account in question |
| 35 |
and any relevant earlier period. |
| |
(3) | For this purpose a period of account is relevant to a later period if the accounts |
| |
for the later period rely to any extent on amounts derived from the earlier |
| |
| |
718 | GAAP-compliant accounts: reference to consolidated group accounts |
| 40 |
(1) | In determining whether a company’s accounts are GAAP-compliant, reference |
| |
may be made to any view about— |
| |
|
| |
|
| |
|
(a) | the useful life of an asset, or |
| |
(b) | the economic value of an asset, |
| |
| taken for the purposes of consolidated group accounts prepared for any group |
| |
of companies of which the company is a member. |
| |
(2) | This section does not apply if the consolidated group accounts— |
| 5 |
(a) | are drawn up using a different accounting framework from that used |
| |
for the company’s individual accounts, and |
| |
(b) | as a result are prepared on a basis that, in relation to the matters |
| |
mentioned in subsection (1), substantially diverges from the basis used |
| |
in the company’s individual accounts. |
| 10 |
(3) | This section does not apply so far as the consolidated group accounts are |
| |
| |
(a) | in accordance with the requirements of the law of a country outside the |
| |
| |
(b) | on a basis that, in relation to the matters mentioned in subsection (1), |
| 15 |
substantially diverges from generally accepted accounting practice. |
| |
| |
In this Part “accounting value”, in relation to an asset, means the net book value |
| |
(or carrying amount) of the asset recognised for accounting purposes. |
| |
| 20 |
Credits in respect of intangible fixed assets |
| |
| |
(1) | This Chapter provides for credits to be brought into account by a company for |
| |
tax purposes in respect of— |
| |
(a) | receipts in respect of intangible fixed assets that are recognised in |
| 25 |
determining the company’s profit or loss as they accrue (see section |
| |
| |
(b) | receipts in respect of royalties, so far as the receipts do not give rise to |
| |
a credit under section 721 (see section 722), |
| |
(c) | revaluation of an intangible fixed asset (see section 723), |
| 30 |
(d) | credits recognised for accounting purposes in respect of negative |
| |
goodwill (see section 724), and |
| |
(e) | the reversal of previous accounting debits in respect of an intangible |
| |
fixed asset (see section 725). |
| |
(2) | This Chapter does not apply in relation to amounts brought into account in |
| 35 |
connection with the realisation of an intangible fixed asset within the meaning |
| |
of Chapter 4 (see section 734). |
| |
(3) | For the rules about those amounts, see that Chapter. |
| |
721 | Receipts recognised as they accrue |
| |
(1) | If in a period of account a gain representing a receipt in respect of an intangible |
| 40 |
fixed asset is recognised in determining the company’s profit or loss, a |
| |
corresponding credit must be brought into account for tax purposes. |
| |
|
| |
|
| |
|
(2) | The amount of the credit is the same as the amount of the gain recognised by |
| |
the company for accounting purposes. |
| |
(3) | Subsection (2) is subject to any adjustments required by this Part or Schedule |
| |
28AA to ICTA (provision not at arm’s length). |
| |
722 | Receipts in respect of royalties so far as not dealt with under section 721 |
| 5 |
(1) | So far as a receipt in respect of any royalty does not give rise to a credit under |
| |
section 721 in the period of account in which it is received or in a subsequent |
| |
period of account, a credit must be brought into account for tax purposes. |
| |
(2) | The credit must be brought into account in the accounting period in which the |
| |
receipt is recognised for accounting purposes. |
| 10 |
(3) | The amount of the credit is equal to so much of the amount of the receipt as |
| |
does not give rise to a credit under section 721. |
| |
| |
(1) | If in a period of account there is an increase in the accounting value of an |
| |
intangible fixed asset on a revaluation, a credit must be brought into account |
| 15 |
| |
(2) | The amount of the credit is the lesser of— |
| |
(a) | the amount corresponding for tax purposes to the increase (see |
| |
| |
(b) | the net total of relevant previous tax debits (see subsection (4)). |
| 20 |
(3) | The amount corresponding for tax purposes to the increase is—![equation: cross[char[I],over[(*s11.00sf"Times New Roman"fV"Regular"V*)times[char[W],char[D],
char[V]],string[(*s11.00sf"Times New Roman"fV"Regular"V*)" AV"]]]](missing.gif) |
| |
| |
| |
WDV is the tax written-down value of the asset immediately before the |
| |
| 25 |
AV is the accounting value of the asset by reference to which the |
| |
revaluation is carried out. |
| |
(4) | The net total of relevant previous tax debits is—![equation: plus[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"D"],
minus[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"C"]]]](missing.gif) |
| |
| |
D is the total debits previously brought into account for tax purposes in |
| 30 |
respect of the asset, and |
| |
C is the total credits so brought into account. |
| |
(5) | For the purposes of this section “revaluation” includes— |
| |
(a) | the valuation of an asset for which a value is shown in the company’s |
| |
balance sheet, but which has not previously been the subject of a |
| 35 |
| |
(b) | the restoration of past losses. |
| |
|
| |
|
| |
|
(6) | This section does not apply to an asset in respect of which an election has been |
| |
made under section 730 (writing down at fixed rate: election for fixed-rate |
| |
| |
| |
(1) | If in a period of account a gain is recognised in determining the company’s |
| 5 |
profit or loss in respect of negative goodwill arising on an acquisition of a |
| |
business, a corresponding credit must be brought into account for tax |
| |
| |
(2) | The amount of the credit is so much of the gain recognised for accounting |
| |
purposes as, on a just and reasonable apportionment, is attributable to |
| 10 |
| |
725 | Reversal of previous accounting loss |
| |
(1) | This section applies if— |
| |
(a) | in a period of account a gain is recognised in determining the |
| |
company’s profit or loss (“the recognised gain”), |
| 15 |
(b) | the gain wholly or partly reverses a loss recognised in a previous period |
| |
of account (“the reversed loss”), and |
| |
(c) | a debit was brought into account for tax purposes under Chapter 3 |
| |
(debits in respect of intangible fixed assets) in respect of that loss (“the |
| |
| 20 |
(2) | A corresponding credit must be brought into account for tax purposes. |
| |
(3) | The amount of the credit is—![equation: cross[(*s11.00sf"Symbol"fV"Regular"V*)times[char[R],char[G]],over[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)char[
D],times[char[R],char[L]]]]](missing.gif) |
| |
| |
RG is the recognised gain, |
| |
| 25 |
| |
(4) | This section does not apply to a gain on a revaluation within the meaning of |
| |
section 723 (see subsection (5) of that section). |
| |
| |
Debits in respect of intangible fixed assets |
| 30 |
| |
(1) | This Chapter provides for debits to be brought into account by a company for |
| |
tax purposes in respect of— |
| |
(a) | expenditure on an intangible fixed asset that is written off for |
| |
accounting purposes as it is incurred (see section 728), |
| 35 |
(b) | writing down the capitalised cost of an intangible fixed asset— |
| |
(i) | on an accounting basis (see section 729), or |
| |
(ii) | on a fixed-rate basis (see sections 730 and 731), and |
| |
|
| |
|
| |
|
(c) | the reversal of a previous accounting gain in respect of an intangible |
| |
fixed asset (see section 732). |
| |
(2) | This Chapter does not apply in relation to amounts brought into account in |
| |
connection with the realisation of an intangible fixed asset within the meaning |
| |
of Chapter 4 (see section 734). |
| 5 |
(3) | For the rules about those amounts, see that Chapter. |
| |
727 | References to expenditure on an asset |
| |
(1) | References in this Part to expenditure on an asset are to any expenditure |
| |
(including abortive expenditure)— |
| |
(a) | for the purpose of acquiring or creating, or establishing title to, the |
| 10 |
| |
(b) | by way of royalty in respect of the use of the asset, or |
| |
(c) | for the purpose of maintaining, preserving or enhancing, or defending |
| |
| |
(2) | No account may be taken of capital expenditure on tangible assets in |
| 15 |
determining for the purposes of this Part the amount of expenditure on an |
| |
| |
(3) | In subsection (2) “capital expenditure” has the same meaning as in CAA 2001. |
| |
(4) | If expenditure is incurred partly as mentioned in subsection (1) or (2) and |
| |
partly otherwise, any necessary apportionment must be made on a just and |
| 20 |
| |
728 | Expenditure written off as it is incurred |
| |
(1) | If in a period of account expenditure on an intangible fixed asset is recognised |
| |
in determining a company’s profit or loss, a corresponding debit must be |
| |
brought into account for tax purposes. |
| 25 |
(2) | The amount of the debit recognised for tax purposes is the same as the amount |
| |
of the loss recognised by the company for accounting purposes. |
| |
(3) | Subsection (2) is subject to any adjustments required by this Part or Schedule |
| |
28AA to ICTA (provision not at arm’s length). |
| |
(4) | This section does not apply if the loss represents previously capitalised |
| 30 |
| |
(5) | Nothing in section 59 (patent royalties) prevents a debit from being brought |
| |
into account in accordance with this section, and so given effect under Chapter |
| |
| |
729 | Writing down on accounting basis |
| 35 |
(1) | If in a period of account a loss is recognised in determining a company’s profit |
| |
or loss in respect of capitalised expenditure on an intangible fixed asset— |
| |
(a) | by way of amortisation, or |
| |
(b) | as a result of an impairment review, |
| |
| a corresponding debit must be brought into account for tax purposes. |
| 40 |
|
| |
|
| |
|
(2) | The reference in subsection (1) to an “impairment review” does not include the |
| |
valuation of an asset for the purpose of determining the amount of expenditure |
| |
to be capitalised in the first place. |
| |
(3) | In the period of account in which expenditure on an asset is capitalised the |
| |
amount of the debit for tax purposes in respect of the expenditure is—![equation: cross[string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"L"],over[(*f"Book Antiqua Parliamentary"fV"Regular"V*)char[
E],times[char[C],char[E]]]]](missing.gif) |
| 5 |
| |
L is the amount of the loss recognised for accounting purposes, |
| |
E is the amount of expenditure on the asset that is recognised for tax |
| |
| |
CE is the amount capitalised in respect of expenditure on the asset. |
| 10 |
(4) | For the purposes of subsection (3), subject to any adjustments required by this |
| |
Part or Schedule 28AA to ICTA (provision not at arm’s length), the amount of |
| |
expenditure on the asset that is recognised for tax purposes is the same as the |
| |
amount of expenditure on the asset capitalised by the company. |
| |
(5) | In a subsequent period of account the amount of the debit for tax purposes in |
| 15 |
respect of the expenditure on an asset is—![equation: cross[string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"L"],over[(*f"Book Antiqua Parliamentary"fV"Regular"V*)string[
(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"WDV"],string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"AV"]]]](missing.gif) |
| |
| |
L is the amount of the loss recognised for accounting purposes, |
| |
WDV is the tax written-down value of the asset (see section 742) |
| |
immediately before the amortisation charge is made or, as the case may |
| 20 |
be, the impairment loss is recognised for accounting purposes, and |
| |
AV is the value of the asset recognised for accounting purposes |
| |
immediately before the amortisation charge or, as the case may be, the |
| |
| |
(6) | In this section “capitalised” means capitalised for accounting purposes. |
| 25 |
(7) | This section does not apply to an asset in respect of which an election is made |
| |
| |
730 | Writing down at fixed rate: election for fixed-rate basis |
| |
(1) | A company may elect to write down the cost of an intangible fixed asset for tax |
| |
purposes at a fixed rate. |
| 30 |
(2) | The election may be made whether or not the asset is written down for |
| |
| |
(3) | The election may only be made— |
| |
| |
(b) | to an officer of Revenue and Customs, and |
| 35 |
(c) | not later than 2 years after the end of the accounting period in which the |
| |
asset is created or acquired by the company. |
| |
(4) | The election applies to all expenditure on the asset that is capitalised for |
| |
| |
|
| |
|