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 6 — How credits and debits are given effect
360

“commercial letting of furnished holiday accommodation” has the
meaning given by section 265,
“ordinary property business” means a UK property business except so far
as it is a furnished holiday lettings business, and
“furnished holiday lettings business” means a UK property business so
5
far as it consists of the commercial letting of furnished holiday
accommodation in the United Kingdom.
749
Assets held for purposes of mines, transport undertakings, etc
(1)
This section applies if credits or debits are to be brought into account in an
accounting period in respect of an asset held by a company for the purposes of
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a concern listed in section 39(4) (mines, quarries and other concerns) that is
carried on by it in that period.
(2)
The credits are given effect by treating them as receipts of the concern in
calculating the profits of the concern under Part 3 (trading income).
(3)
The debits are given effect by treating them as expenses of the concern in
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calculating the profits of the concern under that Part.
750
Assets held for purposes falling within more than one section
If an asset is held—
(a)
for purposes falling within more than one of sections 747 to 749, or
(b)
for purposes falling within one or more of those sections and for
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purposes not so falling,
any necessary apportionment must be made on a just and reasonable basis.
Non-trading credits and debits
751
Non-trading gains and losses
(1)
If there are non-trading credits or debits in an accounting period in respect of
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intangible fixed assets, the company’s non-trading gain or loss on such assets
in the period must be calculated.
(2)
There is a non-trading gain on intangible fixed assets in an accounting period
if subsection (3) or (4) applies.
(3)
If in the accounting period—
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(a)
there are non-trading credits, but
(b)
there are no non-trading debits,

there is a non-trading gain on intangible fixed assets equal to the sum of the
credits.
(4)
If in the accounting period—
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(a)
there are both non-trading credits and non-trading debits, and
(b)
the total non-trading credits exceed the total non-trading debits,

there is a non-trading gain on intangible fixed assets equal to the excess.
(5)
There is a non-trading loss on intangible fixed assets in an accounting period if
subsection (6) or (7) applies.
40

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 7 — Roll-over relief in case of realisation and reinvestment
361

(6)
If in the accounting period—
(a)
there are non-trading debits, but
(b)
there are no non-trading credits,

there is a non-trading loss on intangible fixed assets equal to the sum of the
debits.
5
(7)
If in the accounting period—
(a)
there are both non-trading credits and non-trading debits, and
(b)
the total non-trading debits exceed the total non-trading credits,

there is a non-trading loss on intangible fixed assets equal to the excess.
(8)
For the treatment of non-trading gains and losses see—
10
(a)
section 752 (charge to tax on non-trading gains on intangible fixed
assets), and
(b)
section 753 (treatment of non-trading losses).
752
Charge to tax on non-trading gains on intangible fixed assets
The charge to corporation tax on income applies to non-trading gains arising
15
to a company on intangible fixed assets.
753
Treatment of non-trading losses
(1)
A company that has a non-trading loss on intangible fixed assets for an
accounting period may claim to have the whole or part of the loss set off
against the company’s total profits for that period.
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(2)
Such a claim must be made—
(a)
not later than the end of the period of 2 years immediately following the
end of the accounting period to which it relates, or
(b)
within such further period as an officer of Revenue and Customs may
allow.
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(3)
To the extent that the loss is not—
(a)
set off against total profits on a claim under subsection (1), or
(b)
surrendered by way of group relief (see section 403 of ICTA),

it is carried forward to the next accounting period of the company and treated
as if it were a non-trading debit of that period.
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Chapter 7
Roll-over relief in case of realisation and reinvestment
When the relief is given
754
The relief: the “old asset” and “other assets”
(1)
This Chapter provides for relief if a company realises an intangible fixed asset
35
and incurs expenditure on other intangible fixed assets.
(2)
In this Chapter references to the “old asset” are references to the asset that is
realised and references to “other assets” are references to the other assets on
which expenditure is incurred.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 7 — Roll-over relief in case of realisation and reinvestment
362

(3)
A company is entitled to relief under this Chapter only if—
(a)
the conditions in section 755 are met in relation to the old asset and its
realisation,
(b)
the conditions in section 756 are met in relation to the expenditure on
other assets, and
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(c)
the company claims the relief in accordance with section 757.
(4)
See also the following provisions (which extend or restrict the circumstances in
which relief is available)—
(a)
sections 777 to 779 (application of roll-over relief where there is
reinvestment by group members),
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(b)
section 791 (application of roll-over relief in relation to degrouping
charge),
(c)
section 794 (application of roll-over relief in relation to reallocated
charge),
(d)
section 850 (part realisation involving related party acquisition:
15
exclusion of roll-over relief), and
(e)
sections 898 and 899 (roll-over relief for disposals of pre-FA 2002
assets).
755
Conditions relating to the old asset and its realisation
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(1)
The old asset must have been a chargeable intangible asset of the company
throughout the period during which it was held by the company (but see
subsection (5)).
(2)
The proceeds of realisation of the old asset must exceed—
(a)
the cost of the asset,
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(b)
in the case of a part realisation, the appropriate proportion of the cost
of the asset (see section 759(1) and (2)), or
(c)
in the case of the realisation of an asset that has previously been the
subject of a part realisation, the adjusted cost of the asset (see section
759(3)).
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(3)
In subsection (2) “the cost of the asset” means the total capitalised expenditure
on the asset recognised for tax purposes.
(4)
The condition in subsection (2) is met if the old asset has no cost as defined in
subsection (3).
(5)
Subsection (6) applies if the old asset was a chargeable intangible asset of the
35
company—
(a)
at the time of its realisation, and
(b)
for a substantial proportion of the period during which it was held by
the company, but not for the whole of that period.
(6)
The same proportion of the asset is treated for the purposes of this Chapter as
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if it were a separate asset in relation to which the condition in subsection (1)
was wholly met.
(7)
Any apportionment necessary for the purposes of subsections (5) and (6) must
be made on a just and reasonable basis.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 7 — Roll-over relief in case of realisation and reinvestment
363

756
Conditions relating to expenditure on other assets
(1)
The expenditure on other assets must be incurred in the period—
(a)
beginning 12 months before the date of realisation of the old asset or at
such earlier time as an officer of Revenue and Customs may by notice
allow, and
5
(b)
ending 3 years after the date of realisation of the old asset or at such
later time as an officer of Revenue and Customs may by notice allow.
(2)
The expenditure on other assets must be capitalised by the company for
accounting purposes.
(3)
Immediately after the expenditure is incurred the other assets must be
10
chargeable intangible assets in relation to the company.
(4)
For the purposes of this section expenditure is treated as incurred when it is
recognised for accounting purposes.
757
Claim for relief
A claim by a company for relief under this Chapter must specify—
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(a)
the old assets to which the claim relates,
(b)
the amount of the relief claimed in relation to each old asset, and
(c)
in relation to each old asset, the expenditure on other assets by
reference to which relief is claimed.
How the relief is given
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758
How the relief is given: general
(1)
A company that is entitled to relief under this Chapter is treated for the
purposes of this Part as if—
(a)
the proceeds of realisation of the old asset, and
(b)
the cost recognised for tax purposes of acquiring the other assets,
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were each reduced by the amount available for relief.
(2)
If the qualifying expenditure on other assets equals or exceeds the proceeds of
realisation of the old asset, the amount available for relief is the amount by
which the proceeds of realisation exceed the cost of the old asset.
(3)
If the qualifying expenditure on other assets is less than the proceeds of
30
realisation of the old asset, the amount available for relief is the amount by
which the qualifying expenditure on other assets exceeds the cost of the old
asset.
(4)
In this section “qualifying expenditure” means expenditure in relation to
which the conditions in section 756 are met.
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(5)
In this section “the cost of the old asset” means the total capitalised expenditure
on the asset recognised for tax purposes, but—
(a)
in the case of a part realisation, references to the cost of the old asset are
references to the appropriate proportion of the cost (see section 759(1)
and (2)), and
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 7 — Roll-over relief in case of realisation and reinvestment
364

(b)
in the case of the realisation of an asset that has previously been the
subject of a part realisation, references to the cost of the old asset are
references to the adjusted cost (see section 759(3)).
(6)
The relief does not affect the treatment of any other party to—
(a)
any transaction involved in the realisation of the old asset, or
5
(b)
the expenditure on the other assets,

for any purpose of the enactments relating to income tax, corporation tax or
chargeable gains.
759
Determination of appropriate proportion of cost and adjusted cost
(1)
In the case of a part realisation, any reference in section 755 or 758 to the
10
appropriate proportion of the cost of the old asset is to the following
proportion of it—

where—
AVB is the accounting value immediately before the part realisation, and
AVA is the accounting value immediately after the part realisation.
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(2)
If the old asset has previously been the subject of a part realisation, the
reference in subsection (1) to the cost of the old asset is a reference to the
adjusted cost.
(3)
References in sections 755 and 758 and subsection (2) to the adjusted cost are
references to the cost of the old asset, less the sum of the amounts given by
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subsections (1) and (2) in relation to earlier part realisations.
760
References to cost of asset where asset affected by change of accounting
policy
(1)
In the case of an asset to which Chapter 15 has applied (adjustments on change
of accounting policy) the references in this Chapter to the cost of the asset must
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be read as follows.
(2)
If section 872 (adjustments in respect of change) applied, the references are
unaffected.
(3)
If section 874 or 876 (change of accounting policy involving disaggregation)
applied, the references to the cost of the asset must be read as references to the
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appropriate proportion of that cost.
(4)
For the purposes of subsection (3) the appropriate proportion is determined by
applying to the cost of the asset the same fraction as is applied by section 875(2)
or (3) or 876(3), as the case may be, to determine the tax written-down value of
the asset after the change.
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(5)
References in this section to sections 872, 874, 875 and 876 include references to
those provisions as applied by section 877 (election for fixed-rate writing down
in relation to resulting asset).