(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),
(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).
(3) For the rules about those amounts, see that Chapter.
(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 asset,
(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 title to, the asset.
(2) No account may be taken of capital expenditure on tangible assets in determining for the purposes of this Part the amount of expenditure on an intangible asset.
(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 reasonable basis.
(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.
(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 Part 4 of TIOPA 2010 (provision not at arm's length).
(4) This section does not apply if the loss represents previously capitalised expenditure.
(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 6 of this Part.
(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.
(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—
L
×
E
CE
where—
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 purposes, and
CE is the amount capitalised in respect of expenditure on the asset.
(4) For the purposes of subsection (3), subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (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 respect of the expenditure on an asset is—
L
×
WDV
AV
where—
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 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 impairment review.
(6) In this section “capitalised” means capitalised for accounting purposes.
(7) This section does not apply to an asset in respect of which an election is made under section 730.
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.
(2) The election may be made whether or not the asset is written down for accounting purposes.
(3) The election may only be made—
(a) in writing,
(b) to an officer of Revenue and Customs, and
(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 accounting purposes.
(5) The election is irrevocable.
(1) If an election is made under section 730 for writing down at a fixed rate, a debit equal to the lesser of—
(a) 4% of the cost of the asset, and
(b) the balance of the tax written-down value,
must be brought into account for tax purposes in each accounting period beginning with that in which the relevant expenditure is incurred.
(2) If the accounting period is less than 12 months, the amount mentioned in subsection (1)(a) must be proportionately reduced.
(3) In this section “the cost of the asset” means the cost recognised for tax purposes.
(4) The cost of the asset recognised for tax purposes is the same as the amount capitalised for accounting purposes in respect of expenditure on the asset.
(5) Subsection (4) is subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length).
(6) If there is a part realisation of the asset (see section 734(4)), the reference in subsection (1)(a) to the cost of the asset must be read as a reference to the sum of—
(a) the cost recognised for tax purposes in respect of the value of the asset recognised for accounting purposes immediately after the part realisation, and
(b) the cost recognised for tax purposes of any subsequent expenditure on the asset that is capitalised for accounting purposes.
(7) If there is a further part realisation, subsection (6) applies again.
(1) This section applies if—
(a) in a period of account a loss is recognised in determining a company's profit or loss (“the recognised loss”),
(b) the loss wholly or partly reverses a gain recognised in a previous period of account (“the reversed gain”), and
(c) a credit was brought into account for tax purposes under Chapter 2 (credits in respect of intangible fixed assets) in respect of that gain (“the previous credit”).
(2) A corresponding debit must be brought into account for tax purposes.
(3) The amount of that debit is—
RL
×
PC
RG
where—
RL is the recognised loss,
PC is the previous credit, and
RG is the reversed gain.
(4) References in this section to the recognition of a loss that reverses a gain recognised in a previous period of account do not include a loss recognised—
(a) by way of amortisation of an asset that has previously been the subject of a revaluation, or
(b) as a result of an impairment review of such an asset.
(5) In subsection (4) “revaluation” has the same meaning as in section 723 (see subsection (5) of that section).
(1) This Chapter provides for credits or debits to be brought into account for tax purposes on the realisation by a company of an intangible fixed asset.
(2) For the meaning of “realisation”, see section 734.
(3) Sections 735 to 738 are subject to Chapter 7 (roll-over relief in case of realisation and reinvestment).
(4) This Chapter is also relevant for determining—
(a) whether an asset is a chargeable intangible asset for the purposes of this Part, and
(b) whether a gain is a chargeable realisation gain for the purposes of this Part.
(5) For the meaning of “chargeable intangible asset” and “chargeable realisation gain”, see section 741.
(1) References in this Part to the realisation of an intangible fixed asset are to a transaction resulting, in accordance with generally accepted accounting practice—
(a) in the asset ceasing to be recognised in the company's balance sheet, or
(b) in a reduction in the accounting value of the asset.
(2) In subsection (1) “transaction” includes any event giving rise to a gain recognised for accounting purposes.
(3) In relation to an intangible fixed asset that has no balance sheet value (or no longer has a balance sheet value), subsections (1) and (2) apply as if it did have a balance sheet value.
(4) References in this Part to a “part realisation” are to a realisation falling within subsection (1)(b).
(1) This section applies if there is a realisation of an intangible fixed asset in respect of which debits have been brought into account for tax purposes.
(2) If the proceeds of realisation exceed the tax written-down value of the asset, a credit equal to the excess must be brought into account for tax purposes.
(3) If the proceeds of realisation are less than the tax written-down value of the asset, a debit equal to the shortfall must be brought into account for tax purposes.
(4) If there are no proceeds of realisation, a debit equal to the tax written-down value must be brought into account for tax purposes.
(5) References in this section to the tax written-down value of an asset are to its tax written-down value immediately before the realisation.
736 Asset shown in balance sheet and not written down for tax purposes
(1) This section applies if—
(a) there is a realisation of an intangible fixed asset to which section 735 does not apply, and
(b) a value is shown for the asset in the company's balance sheet.
(2) If the proceeds of realisation exceed the cost of the asset, a credit equal to the excess must be brought into account for tax purposes.
(3) If the proceeds of realisation are less than the cost of the asset, a debit equal to the shortfall must be brought into account for tax purposes.
(4) If there are no proceeds of realisation, a debit equal to the cost of the asset must be brought into account for tax purposes.
(5) In this section “the cost of the asset” means the cost recognised for tax purposes.
(6) The cost of the asset recognised for tax purposes is the same as the amount of expenditure on the asset capitalised by the company for accounting purposes.
(7) Subsection (6) is subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length)).
(8) If this section has applied on a part realisation of an asset and applies again (on the realisation of the unrealised asset) the references in subsections (2) to (4) to the cost of the asset must be read as references to the sum of—
(a) the cost recognised for tax purposes in respect of the value of the asset recognised for accounting purposes immediately after the part realisation, and
(b) the cost recognised for tax purposes of any subsequent expenditure on the asset that is capitalised for accounting purposes.
(9) If there is a further part realisation, subsection (8) applies again.
(1) In the case of a part realisation—
(a) the references in section 735 to the tax written-down value of the asset, and
(b) the references in section 736 to the cost of the asset,
must be read as references to the appropriate proportion of that amount.
(2) That proportion is—
AVB
-
AVA
AVB
where—
AVB is the accounting value immediately before the realisation, and
AVA is the accounting value immediately after the realisation.
(1) This section applies if—
(a) there is a realisation of an intangible fixed asset, and
(b) neither section 735 (asset written down for tax purposes) nor section 736 (asset shown in balance sheet and not written down for tax purposes) applies.
(2) A credit equal to any proceeds of realisation must be brought into account for tax purposes.
738A Realisation of assets previously subject to Northern Ireland rate
(1) This section applies if—
(a) a company is required by section 735, 736 or 738 to bring into account for tax purposes a credit or debit on the realisation of an intangible fixed asset in an accounting period (“the relevant period”),
(b) the company is not a Northern Ireland company as defined by section 357KA of CTA 2010 in the relevant period,
(c) the asset is not a pre-commencement asset for the purposes of Chapter 8 of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate: intangible fixed assets),
(d) the credit or debit is treated for the purposes of that Chapter as including a Northern Ireland element, and
(e) at any time during the relevant period, the Northern Ireland rate is lower than the main rate.
(2) The amount of the credit or debit to be brought into account for tax purposes under section 735, 736 or 738 is reduced by an amount determined under this section (“the appropriate reduction”).
(3) If the relevant period falls within only one financial year, the appropriate reduction is—
E × MR − NIR MR
where—
E is the Northern Ireland element of the credit or debit (see subsection (5));
MR is the main rate for the financial year;
NIR is the Northern Ireland rate for the financial year.
(4) If the relevant period falls within more than one financial year, take the following steps to find the appropriate reduction—
Step 1 Apportion the Northern Ireland element of the credit or debit (see subsection (5)) between the financial years on a time basis according to the respective lengths of the parts of the relevant period falling within those years.
Step 2 Where an amount is apportioned under step 1 to a financial year in which the Northern Ireland rate is lower than the main rate, multiply that amount by the following fraction—
MR − NIR MR
where—
MR is the main rate for the financial year;
NIR is the Northern Ireland rate for the financial year.
Step 3 To find the appropriate reduction, add together each amount determined under step 2.
(5) In subsections (3) and (4), the “Northern Ireland element” of the credit or debit is an amount determined in accordance with sections 357OE to 357OG of CTA 2010.
(1) In this Part “proceeds of realisation” of an asset means the amount recognised for accounting purposes as the proceeds of realisation, less the amount so recognised as incidental costs of realisation.
(1A) But if the realisation involved the receipt of something other than money, subsection (1) has effect as if the reference to the amount recognised for accounting purposes as the proceeds of realisation were a reference to the amount that would have been so recognised had the receipt been a receipt of a sum of money equal to the price the thing concerned might reasonably have been expected to fetch on a sale in the open market.
(1B) Subsection (1A) does not apply to a realisation by a company if—
(a) either—
(i) as a result of Part 4 of TIOPA 2010 (transfer pricing), the profits and losses of the company are to be calculated for tax purposes as if the arm's length provision in relation to the realisation had been made or imposed instead of the actual provision in relation to it, or
(ii) those profits would be so calculated if the actual provision conferred a potential advantage in relation to United Kingdom taxation (within the meaning of that Part) on the company and differed from the arm’s length provision, and
(b) the realisation is a cross-border realisation.
See also section 151(3) of that Part for provision about applying the arm’s length provision in relation to intangible fixed assets.
(2) The amounts referred to in subsection (1) are subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length).
(3) But where subsection (1A) applies in relation to an amount recognised for accounting purposes, that amount is not to be adjusted as a result of any adjustment required by Part 4 of TIOPA 2010.
(4) For the purposes of subsection (1B)—
(a) a realisation is a cross-border realisation if, at the time of the realisation, the other party to the realisation transaction is—
(i) a UK resident company, but only if it has a qualifying permanent establishment in a territory outside the United Kingdom,
(ii) a non-UK resident company, other than a non-UK resident company that has a permanent establishment in the United Kingdom with a relevant connection to the transaction,
(iii) a non-UK resident individual, other than an individual that carries on a trade, profession or vocation in the United Kingdom through a branch or agency where the transaction is for the purposes of that trade, profession or vocation, or
(iv) a partnership, but only if all of its members are non-UK resident or it has a qualifying permanent establishment in a territory outside the United Kingdom.
(b) where the other party has a permanent establishment in a territory outside the United Kingdom, that permanent establishment is “qualifying” if—
(i) exemption adjustments under section 18A(1) of CTA 2009 (exemption for profits or losses of foreign permanent establishments) would be made in calculating the taxable profits of the other party, and
(ii) those adjustments would include adjustments in respect of the realisation transaction,
(c) a permanent establishment of the other party in the United Kingdom has a relevant connection to the realisation transaction if the transaction is, in accordance with Chapter 4 of Part 2, attributable to that permanent establishment,
(d) “branch or agency”—
(i) means any factorship, agency, receivership, branch or management, but
(ii) does not include any person within any of the exemptions under sections 835G to 835K of ITA 2007 (persons who are not UK representatives).
(e) “actual provision” and “arm’s length provision” are to be construed in accordance with Part 4 of TIOPA 2010 (transfer pricing).
(1) This section applies if—
(a) in a period of account a loss is recognised in determining the company's profit or loss in respect of expenditure by the company for the purposes of a transaction,
(b) the transaction does not proceed to completion, but
(c) were it completed, it would constitute a realisation of an intangible fixed asset.
(2) A corresponding debit must be brought into account for tax purposes.
(3) The amount of the debit is the same as the amount of the loss recognised by the company for accounting purposes.
(4) Subsection (3) is subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length).
741 Meaning of “chargeable intangible asset” and “chargeable realisation gain”
(1) For the purposes of this Part, an asset is a “chargeable intangible asset” in relation to a company at any time if any gain on its realisation by the company at that time would be a chargeable realisation gain.
(2) For the purposes of this Part, “chargeable realisation gain”, in relation to an asset, means a gain on the realisation of the asset that gives rise to a credit required to be brought into account under this Chapter.
(3) For the purposes of subsections (1) and (2), there is a gain on the realisation of an asset in any case if section 735(2), 736(2) or 738(2) applies.
(4) For the purpose of subsections (1) and (2), ignore any question whether—
(a) relief under Chapter 7 (roll-over relief in case of realisation and reinvestment) is available, or
(b) a transfer of an asset is tax-neutral for the purposes of this Part (see section 776).
(1) For the purposes of this Part, the tax written-down value of an intangible fixed asset to which section 729 (writing down on accounting basis) applies is the cost of the asset recognised for tax purposes, less the total net debits brought into account for tax purposes previously in respect of the asset.
(2) For the purposes of subsection (1) the cost of the asset recognised for tax purposes is the same as the amount of the expenditure on the asset that is capitalised for accounting purposes.
(3) Subsection (2) is subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length).
(4) For the purposes of subsection (1) “the total net debits brought into account for tax purposes previously in respect of the asset”, means the total debits so brought into account, less the total credits so brought into account (if any).
(5) In the case of an asset that has been the subject of a part realisation, this section is subject to section 744.
(6) In the case of an asset that has been subject to adjustment on a change of accounting policy, this section is subject to Chapter 15 (adjustments on a change of accounting policy).
(1) For the purposes of this Part, the tax written-down value of an intangible fixed asset in respect of which an election has been made under section 730 (writing down at fixed rate: election for fixed-rate basis) is the cost of the asset recognised for tax purposes, less any debits brought into account for tax purposes previously in respect of the asset under section 731 (writing down at fixed rate: calculation).
(2) For the purposes of subsection (1), the cost of the asset recognised for tax purposes is the same as the amount of the expenditure on the asset that is capitalised for accounting purposes.
(3) Subsection (2) is subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length).
(4) In the case of an asset that has been the subject of a part realisation, this section is subject to section 744.
(5) In the case of an asset that has been subject to adjustment on a change of accounting policy, this section is subject to Chapter 15 (adjustments on change of accounting policy).
(1) The tax written-down value of an intangible asset that has been the subject of a part realisation is determined as follows.
(2) Immediately after the part realisation the tax written-down value of the asset is—
WDVB
×
AVA
AVB
where—
WDVB is the tax written-down value of the asset immediately before the part realisation,
AVA is the accounting value of the asset immediately after the part realisation, and
AVB is the accounting value immediately before the part realisation.
(3) Subsequently, the tax written-down value of the asset is determined in accordance with section 742 or 743, but subject to subsections (4) and (5).
(4) The cost of the asset recognised for tax purposes is the sum of—
(a) the tax written-down value in accordance with subsection (2), and
(b) the cost recognised for tax purposes of subsequent expenditure on the asset that is capitalised for accounting purposes.
(5) Only credits and debits brought into account for tax purposes after the part realisation are taken account of.
(6) If there is a further part realisation, subsections (1) to (5) apply again.
(7) If there is a subsequent change of accounting policy affecting the asset, Chapter 15 (adjustments on change of accounting policy) applies.
(1) Credits and debits to be brought into account for tax purposes under this Part are given effect in accordance with this Chapter.
(2) Credits and debits in respect of assets held for the purposes mentioned in any of the following sections are given effect in accordance with that section—
(a) section 747 (assets held for purposes of trade),
(b) section 748 (assets held for purposes of property business),
(c) section 749 (assets held for purposes of mines, transport undertakings, etc).
(3) Credits and debits in respect of intangible fixed assets that are not within sections 747 to 749 are dealt with in accordance with sections 751 to 753.
(4) This section is subject to section 901 (effect of application of the I minus E basis: non-trading amounts).
746 “Non-trading credits” and “non-trading debits”
(1) In this Part credits and debits in respect of intangible fixed assets that are not within sections 747 to 749 are referred to respectively as “non-trading credits” and “non-trading debits”.
(2) See also—
(a) section 781(5) (character of credits and debits brought into account as a result of section 780),
(b) section 793A (effect of election to reallocate charge within group),
(ba) sections 879C(3), 879I(3), 879K(5) and 879O(3)(b) (debits in respect of goodwill and certain other assets treated as non-trading debits), and
(c) section 901 (insurance companies: effect of application of the I minus E basis: non-trading amounts).
(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 a trade carried on by it in that period.
(2) The credits are given effect by treating them as receipts of the trade in calculating the profits of the trade for tax purposes.
(3) The debits are given effect by treating them as expenses of the trade in calculating the profits of the trade for tax purposes.
(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 a property business carried on by it in that period.
(2) The credits are given effect by treating them as receipts of the business in calculating the profits of the business for tax purposes.
(3) The debits are given effect by treating them as expenses of the business in calculating the profits of the business for tax purposes.
(4) In subsection (1), “property business” means—
(a) a UK property business, or
(b) an overseas property business.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 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 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 purposes not so falling,
any necessary apportionment must be made on a just and reasonable basis.
(1) If there are non-trading credits or debits in an accounting period in respect of 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—
(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—
(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.
(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.
(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—
(a) section 752 (charge to tax on non-trading gains on intangible fixed assets), and
(b) section 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.
(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.
(3) To the extent that the loss is not, in any period (“the reference period”)—
(a) set off against total profits on a claim under subsection (1), or
(b) surrendered by way of group relief under Part 5 of CTA 2010,
it is carried forward to the next accounting period of the company and treated as if it were a non-trading loss on intangible fixed assets for that period.
(4) But subsection (3) does not apply if the company ceased to be a company with investment business in the reference period.
(5) In the application of subsection (3) to an amount of a loss previously carried forward under that subsection, the reference in paragraph (b) to group relief under Part 5 of CTA 2010 is to be read as a reference to group relief for carried-forward losses under Part 5A of that Act.
(6) In this section “company with investment business” has the same meaning as in Part 16 (see section 1218B).
754 The relief: the “old asset” and “other assets”
(1) This Chapter provides for relief if a company realises an intangible fixed asset 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.
(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
(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),
(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: 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
(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,
(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)).
(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 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 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.
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
(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 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.
A claim by a company for relief under this Chapter must specify—
(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.
(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,
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 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.
(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
(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
(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 appropriate proportion of the cost of the old asset is to the following proportion of it—
AVB
-
AVA
AVB
where—
AVB is the accounting value immediately before the part realisation, and
AVA is the accounting value immediately after the part realisation.
(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 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 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 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.
(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).
761 Declaration of provisional entitlement to relief
(1) A company realising an intangible fixed asset may make a declaration of provisional entitlement to relief under this Chapter.
(2) While the declaration continues in force, this Chapter applies as if the conditions for relief under this Chapter were met.
(3) A declaration of provisional entitlement is a declaration by the company, in its company tax return for the accounting period in which the realisation takes place, that the company—
(a) has realised an intangible fixed asset,
(b) proposes to meet the conditions for relief under this Chapter, and
(c) accordingly is provisionally entitled to relief of a specified amount.
(4) A declaration of provisional entitlement ceases to have effect if or to the extent that—
(a) it is withdrawn, or
(b) it is superseded by a claim for relief under this Chapter.
(5) So far as not previously withdrawn or superseded, a declaration of provisional entitlement ceases to have effect 4 years after the end of the accounting period in which the realisation took place.
(6) If a declaration of provisional entitlement ceases to have effect, in whole or in part, all necessary adjustments must be made, by assessment or otherwise.
(7) Subsection (6) applies despite any limitation on the time within which assessments or amendments may be made.
If a company realises an asset and subsequently reacquires it, this Chapter applies as if what is reacquired were a different asset from that previously realised.
763 Disregard of deemed realisations and reacquisitions
(1) This Chapter does not apply in relation to a realisation of an asset that does not actually occur but is treated as occurring, except as provided by—
(a) section 791 (application of roll-over relief in relation to degrouping charge), or
(b) section 794 (application of roll-over relief in relation to reallocated charge).
(2) Reacquisitions that do not actually occur but are treated as occurring are ignored for the purposes of this Chapter.
764 Meaning of “company”, “group” and “subsidiary”
(1) This Chapter applies for the purposes of this Part to determine whether companies form a group and, where they do, which is the principal company of the group.
(2) In this Chapter, references to a company apply only to—
(a) a company within the meaning of the Companies Act 2006 (c. 46),
(b) a company (other than a limited liability partnership) constituted under any other Act or by a Royal Charter or letters patent,
(c) a company formed under the law of a country or territory outside the United Kingdom,
(d) a registered society,
(e) an incorporated friendly society within the meaning of the Friendly Societies Act 1992 (c. 40), or
(f) a building society.
(3) In this Part “group” and “subsidiary” must be read with any necessary modifications if applied to a company formed under the law of a country or territory outside the United Kingdom.