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
423

888
Cases where chargeable gains rule applies
(1)
This section applies if—
(a)
expenditure on the acquisition of an asset does not qualify for any form
of tax relief against income under the law as it was before 1 April 2002,
(b)
that expenditure would be treated as incurred on or after that date
5
under the general rule in section 887, and
(c)
the relevant disposal of the asset is treated as occurring before that date
for the purposes of TCGA 1992 or would be so treated under the law as
it was before 1 April 2002.
(2)
For the purposes of section 883 (assets treated as created or acquired when
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expenditure incurred), the expenditure is treated as incurred before 1 April
2002.
(3)
In subsection (1) “the relevant disposal” means the disposal on which the
acquisition mentioned in subsection (1)(a) occurred.
889
Cases where capital allowances general rule applies
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(1)
This section applies if under the law as it was before 1 April 2002 expenditure
on the creation or acquisition of an asset is qualifying expenditure for the
purposes of any allowance under CAA 2001.
(2)
For the purposes of section 883 (assets treated as created or acquired when
expenditure incurred) the expenditure is treated as incurred when an
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unconditional obligation to pay it arises.
(3)
For this purpose the fact that the whole or part of the expenditure is not
required to be paid until a later date does not prevent there being an
unconditional obligation to pay it.
Fungible assets
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890
Fungible assets: application of section 858
(1)
This section and section 891 apply for the purposes of this Chapter in relation
to assets to which section 858 (treatment of fungible assets) applies.
(2)
Section 858 applies as if—
(a)
pre-FA 2002 assets, and
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(b)
intangible fixed assets that are not pre-FA 2002 assets,

were assets of different kinds.
(3)
If section 858 applies (whether or not it is a case where subsection (2) has
effect)—
(a)
a single asset comprising pre-FA 2002 assets is treated as itself being a
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pre-FA 2002 asset, and
(b)
a single asset comprising intangible fixed assets that are not pre-FA
2002 assets is treated as itself being an asset to which this Part applies.
891
Realisation and acquisition of fungible assets
(1)
Subsection (2) applies if—
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(a)
a company realises a fungible asset, and

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
424

(b)
apart from section 890(2), the asset would be treated as part of a single
asset comprising both pre-FA 2002 assets and assets that are not pre-FA
2002 assets.
(2)
The realisation is treated as diminishing the single asset of the company
comprising pre-FA 2002 assets in priority to diminishing the single asset of the
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company comprising assets that are not pre-FA 2002 assets.
(3)
Fungible assets acquired by a company that would not otherwise be treated as
pre-FA 2002 assets are so treated so far as they are identified, in accordance
with the following rules, with pre-FA 2002 assets realised by the company.
(4)
Rule 1 is that assets acquired are identified with pre-FA 2002 assets of the same
10
kind realised by the company within the period beginning 30 days before and
ending 30 days after the date of the acquisition.
(5)
The reference in subsection (4) to assets “of the same kind” is to assets that are,
or but for section 890(2) would be, treated as part of a single asset because of
section 858.
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(6)
Rule 2 is that assets realised earlier are identified before assets realised later.
(7)
Rule 3 is that assets acquired earlier are identified before assets acquired later.
(8)
In this section “fungible asset” means an intangible fixed asset to which section
858 applies.
Assets treated as pre-FA 2002 assets
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892
Certain assets acquired on transfer of business
(1)
This section applies if—
(a)
a company (“the transferor”) transfers to another company (“the
transferee”) an asset that is a pre-FA 2002 asset in the hands of the
transferor company,
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(b)
the transfer is one in relation to which the transferor is treated for the
purposes of TCGA 1992 as disposing of the asset for a consideration
that secures that neither a gain nor a loss accrues to it, and
(c)
it is so treated because of a provision specified in subsection (2).
(2)
The provisions are—
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(a)
section 139 of TCGA 1992 (reconstruction involving transfer of
business),
(b)
section 140A of that Act (transfer or division of UK business), and
(c)
section 140E of that Act (merger leaving assets within UK tax charge).
(3)
In the hands of the transferee the asset is treated for the purposes of this Part
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as a pre-FA 2002 asset.
(4)
This section does not apply if the transfer mentioned in subsection (1) occurred
before 28 June 2002.
893
Assets whose value derives from pre-FA 2002 assets
(1)
This section applies if—
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
425

(a)
on or after 1 April 2002 a company (“the acquiring company”) acquires
an intangible fixed asset (“the acquired asset”) from a person (“the
transferor”),
(b)
the acquired asset is created on or after 1 April 2002,
(c)
at the time of the acquisition the transferor and the acquiring company
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are related parties,
(d)
the value of the acquired asset derives in whole or in part from any
other asset (“the other asset”), and
(e)
the other asset meets the preserved status conditions (see section 894).
(2)
In the hands of the acquiring company the acquired asset is treated for the
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purposes of this Part as a pre-FA 2002 asset so far as its value derives from the
other asset.
(3)
If only part of the value of the acquired asset derives from the other asset—
(a)
this Part applies as if there were a separate asset representing the part
of the value that does not so derive, and
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(b)
the alternative enactments apply as if there were a separate asset
representing the part of the value that does so derive.
(4)
In subsection (3) “the alternative enactments” means the enactments that apply
where this Part does not apply.
(5)
For the purposes of this section the cases in which the value of an asset may be
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derived from any other asset include any case where—
(a)
assets have been merged or divided,
(b)
assets have changed their nature, or
(c)
rights or interests in or over assets have been created or extinguished.
(6)
Section 894 supplements this section.
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894
The preserved status conditions etc
(1)
For the purposes of section 893(1) the other asset meets the preserved status
conditions if subsections (2) and (3) apply.
(2)
This subsection applies if on or after 1 April 2002 the other asset—
(a)
has been a pre-FA 2002 asset in the hands of the transferor at a time
30
when the transferor and the acquiring company were related parties, or
(b)
has been a pre-FA 2002 asset in the hands of any other person at a time
when—
(i)
the other person and the acquiring company were related
parties, or
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(ii)
the other person and the transferor were related parties.
(3)
This subsection applies if the other asset has not at any time on or after 5
December 2005 been a chargeable intangible asset in the hands of—
(a)
the acquiring company,
(b)
a person who is a related party in relation to that company, or
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(c)
the transferor.
(4)
It does not matter for the purposes of section 893(1)(b) who created the
acquired asset.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 16 — Pre-FA 2002 assets etc
426

(5)
Any apportionment necessary for the purposes of section 893(3) must be made
on a just and reasonable basis.
(6)
Sections 883 to 889 (provisions explaining when assets are treated as created or
acquired) apply for the purposes of section 893 as they apply for the purposes
of section 882.
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(7)
Expressions used in this section have the same meaning as in section 893.
895
Assets acquired in connection with disposals of pre-FA 2002 assets
(1)
This section applies if—
(a)
a person disposes of an asset which is a pre-FA 2002 asset in the
person’s hands at the time of the disposal,
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(b)
a company acquires an intangible fixed asset directly or indirectly in
consequence of the disposal or otherwise in connection with it,
(c)
the company and the person are related parties at the time of the
disposal, and
(d)
the acquired asset would be a chargeable intangible asset in the hands
15
of the company at the time of the acquisition apart from this section.
(2)
The acquired asset is treated for the purposes of this Part as a pre-FA 2002 asset
in the company’s hands.
(3)
For the purposes of this section—
(a)
“asset”, in relation to any disposal, means any asset for the purposes of
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TCGA 1992,
(b)
a person “disposes of” an asset if, for the purposes of that Act, the
person makes a part disposal of the asset or any other disposal of it, and
(c)
the time at which a disposal of an asset is made is the time at which it
is made for the purposes of that Act.
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(4)
For the purposes of this section it does not matter whether—
(a)
the asset that the person disposes of is the same asset as the acquired
asset,
(b)
the acquired asset is acquired at the time of the disposal, or
(c)
the acquired asset is acquired by merging assets or otherwise.
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Application of Part to royalties and telecommunication rights
896
Application to royalties
(1)
This Part—
(a)
applies to royalties recognised for accounting purposes on or after 1
April 2002, and
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(b)
does not apply to royalties recognised for accounting purposes before
that date.
(2)
But subsection (1) is subject to subsection (3).
(3)
This section does not authorise or require an amount to be brought into
account in connection with the realisation of a pre-FA 2002 asset.
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(4)
In this section “realisation” has the same meaning as in Chapter 4 (see section
734).