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Corporation Tax Bill


Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 14 — Miscellaneous provisions

408

 

Values to be used in special cases

856     

Assets acquired or realised together

(1)   

Any reference in this Part to the acquisition or realisation of an asset includes

a reference to the acquisition or realisation of that asset together with other

assets.

5

(2)   

For the purposes of this Part assets acquired or realised as a result of one

bargain are treated as acquired or realised together even though—

(a)   

separate prices are, or purport to be, agreed for separate assets, or

(b)   

there are, or purport to be, separate acquisitions or realisations of

separate assets.

10

(3)   

If assets are acquired together, any values allocated to particular assets by the

company in accordance with generally accepted accounting practice must be

accepted for the purposes of this Part.

(4)   

If no such values are so allocated, so much of the expenditure as on a just and

reasonable apportionment is properly attributable to each asset is treated for

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the purposes of this Part as referable to that asset.

(5)   

If assets are realised together, so much of the proceeds of realisation as on a just

and reasonable apportionment is properly attributable to each asset is treated

for the purposes of this Part as proceeds of the realisation of that asset.

857     

Deemed market value acquisition: adjustment where nil accounting value

20

(1)   

This section applies if—

(a)   

a company is treated for the purposes of this Part as acquiring an asset

at market value, but

(b)   

the accounting value of the asset transferred is nil in the hands of the

transferee.

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(2)   

In such a case any reference in this Part to—

(a)   

the cost of the asset recognised for accounting purposes,

(b)   

the accounting value of the asset, or

(c)   

any loss recognised for accounting purposes in respect of capitalised

expenditure on the asset,

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is a reference to the cost, value or loss that would have been recognised if the

asset had been acquired at market value.

(3)   

If the asset is revalued, the revaluation is ignored.

(4)   

In this section “revaluation” has the same meaning as in section 723 (see

subsection (5) of that section) and “revalued” must be read accordingly.

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Fungible assets

858     

Fungible assets

(1)   

For the purposes of this Part—

(a)   

fungible assets of the same kind that are held by the same person in the

same capacity are treated as indistinguishable parts of a single asset,

40

 
 

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 14 — Miscellaneous provisions

409

 

(b)   

that asset is treated as growing as additional assets of the same kind are

created or acquired, and

(c)   

that asset is treated as diminishing as some of the assets are realised.

(2)   

In this Part “fungible assets” means assets of a nature to be dealt in without

identifying the particular assets involved.

5

Assets ceasing to be or becoming chargeable intangible assets

859     

Asset ceasing to be chargeable intangible asset: deemed realisation at market

value

(1)   

If an asset ceases to be a chargeable intangible asset in relation to a company in

any of the circumstances specified in subsection (2), this Part applies as if—

10

(a)   

immediately before the asset ceased to be a chargeable intangible asset

in relation to the company, the company had realised the asset for its

market value at that time, and

(b)   

the company had immediately reacquired it at that value.

(2)   

The circumstances are—

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(a)   

that the company ceases to be UK resident,

(b)   

in the case of a company that is not UK resident, any circumstances not

involving the realisation of the asset by the company, and

(c)   

that the asset begins to be held for the purposes of a mutual trade or

business.

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(3)   

Subsection (1) is subject to section 860.

860     

Asset ceasing to be chargeable intangible asset: postponement of gain

(1)   

This subsection applies if—

(a)   

section 859 applies because a company (“A”) ceases to be UK resident,

(b)   

immediately before A ceases to be UK resident the asset is held by it for

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the purposes of a trade carried on by it outside the United Kingdom

through a permanent establishment,

(c)   

the proceeds of the realisation of the asset that is treated as occurring

under section 859 exceed the original cost of the asset recognised for tax

purposes,

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(d)   

immediately after A ceases to be UK resident it is a 75% subsidiary of

another company (“B”) that is UK resident, and

(e)   

A and B so elect by notice given to an officer of Revenue and Customs

not later than 2 years after the date on which A ceased to be UK

resident.

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(2)   

If subsection (1) applies, this Part applies as if the proceeds of the realisation of

the asset that is treated as occurring under section 859 were reduced to the

original cost of the asset recognised for tax purposes.

(3)   

For the later treatment of the amount of the reduction under subsection (2), see

sections 861 and 862.

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(4)   

In those sections—

(a)   

“the postponed gain” means the amount of that reduction, and

(b)   

references to “A” and “B” must be read in accordance with this section.

 
 

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 14 — Miscellaneous provisions

410

 

861     

Treatment of postponed gain on subsequent realisation

(1)   

This section applies if A realises the asset to which section 860 applies before

the end of the period of 6 years after the date on which it ceases to be UK

resident.

(2)   

B must bring into account for tax purposes—

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(a)   

a credit equal to the postponed gain, or

(b)   

in the case of a part realisation, a credit equal to the appropriate

proportion of the postponed gain.

(3)   

The appropriate proportion is—

   

equation: over[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)plus[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)times[

char[M],char[V],char[B]],minus[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)times[

char[M],char[V],char[A]]]],times[char[M],char[V],char[B]]]

10

   

where—

MVB is the market value of the asset immediately before the part

realisation, and

MVA is the market value of the asset immediately after the part

realisation.

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(4)   

Subsection (2) does not apply—

(a)   

so far as the postponed gain has already been brought into account on

a previous part realisation, or

(b)   

if the postponed gain has already been brought into account under

section 862.

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(5)   

A credit brought into account by B under this section is treated as a non-trading

credit for the purposes of Chapter 6 (how credits and debits are given effect).

862     

Treatment of postponed gain in other cases

(1)   

This section applies if at any time after A ceases to be UK resident—

(a)   

A ceases to be a 75% subsidiary of B on the disposal by B of ordinary

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shares of A,

(b)   

A ceases to be such a subsidiary otherwise than on such a disposal and

later B disposes of such shares, or

(c)   

B ceases to be UK resident.

(2)   

B must bring into account for tax purposes a credit equal to the postponed gain.

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(3)   

Subsection (2) does not apply so far as the postponed gain has already been

brought into account under section 861.

(4)   

Any credit falling to be brought into account under subsection (2) because B

ceases to be UK resident must be brought into account immediately before it

does so.

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(5)   

A credit brought into account by B under this section is treated as a non-trading

credit for the purposes of Chapter 6 (how credits and debits are given effect).

 
 

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 14 — Miscellaneous provisions

411

 

863     

Asset becoming chargeable intangible asset

(1)   

This section applies if an asset becomes a chargeable intangible asset in relation

to a company—

(a)   

on the company becoming UK resident,

(b)   

in the case of a company that is not UK resident, on the asset beginning

5

to be held for the purposes of a trade carried on by the company in the

United Kingdom through a permanent establishment, or

(c)   

on the asset ceasing to be held for the purposes of a mutual trade or

business.

(2)   

This Part applies as if—

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(a)   

the company had acquired the asset immediately after it became a

chargeable intangible asset in relation to the company, and

(b)   

had done so for its accounting value at that time.

Matters to be ignored

864     

Tax avoidance arrangements to be ignored

15

(1)   

In determining whether a credit or a debit is to be brought into account under

this Part and, if so, its amount, any tax avoidance arrangements are ignored.

(2)   

Arrangements are “tax avoidance arrangements” for this purpose if their main

object or one of their main objects is to enable a company—

(a)   

to obtain a debit under this Part to which it would not otherwise be

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entitled,

(b)   

to obtain a debit under this Part which exceeds that to which it would

otherwise be entitled,

(c)   

to avoid having to bring a credit into account under this Part, or

(d)   

to reduce the amount of any such credit.

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(3)   

In this section—

“arrangements” includes any scheme, agreement or understanding,

whether or not it is legally enforceable, and

“brought into account” means brought into account for tax purposes.

865     

Debits for expenditure not generally deductible for tax purposes

30

(1)   

No debit may be brought into account for tax purposes under this Part in

respect of expenditure that is not generally deductible for tax purposes.

(2)   

Expenditure is “not generally deductible for tax purposes” so far as revenue

expenditure of that description incurred for the purposes of a trade would be

non-deductible because of a provision specified in subsection (3).

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(3)   

Those provisions are—

(a)   

section 56 (car or motor cycle hire),

(b)   

section 1298 (business entertainment and gifts),

(c)   

section 1304 (crime-related payments), and

(d)   

section 246(2) of FA 2004 (expenditure on benefits under employer-

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financed retirement benefits schemes).

 
 

 
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