(1) This section and section 873 apply if—
(a) as a result of the change of accounting policy there is a difference (“the accounting difference”) between—
(i) the accounting value of an intangible fixed asset of the company at the end of the earlier period, and
(ii) the accounting value of that asset at the beginning of the later period, and
(b) no election has been made in respect of the asset under section 730 (writing down at fixed rate: election for fixed-rate basis).
(2) If there is an increase in that value, a corresponding credit must be brought into account for tax purposes in the later period.
(3) If there is a decrease in that value, a corresponding debit must be brought into account for tax purposes in the later period.
(4) The amount of the credit or debit is—
D
×
WDVE
AVE
where—
D is the accounting difference,
WDVE is the tax written-down value of the asset at the end of the earlier period, and
AVE is the accounting value of the asset at the end of the earlier period.
(5) But if subsection (2) applies, the credit must not exceed—
(a) the sum of debits brought into account for tax purposes in respect of the asset before the later period, less
(b) the sum of the credits so brought into account.
(6) This section is subject to section 878 (exclusion of credits or debits brought into account under other provisions).
873 Effect of application of section 872 in later period and subsequently
(1) A credit or debit that is required to be brought into account under section 872 is treated as arising at the beginning of the later period (“the relevant time”).
(2) If a credit is to be brought into account, the tax written-down value of the asset at the relevant time is the sum of—
(a) the tax written-down value of the asset at the end of the earlier period, and
(b) the credit.
(3) If a debit is to be brought into account, the tax written-down value of the asset at the relevant time is—
(a) the tax written-down value of the asset at the end of the earlier period, less
(b) the debit.
(4) After the relevant time the cost recognised for tax purposes is the sum of—
(a) the tax written-down value given by subsection (2) or (3), and
(b) the cost recognised for tax purposes of any subsequent expenditure on the asset that is capitalised for accounting purposes.
(5) After the relevant time the tax written-down value is determined taking account only of subsequent credits and debits.
874 Original asset not subject to fixed-rate writing down
(1) This section and section 875 apply if—
(a) the change of accounting policy results in an intangible fixed asset of the company that was treated as one asset (“the original asset”) in the earlier period being treated as two or more assets (“the resulting assets”) in the later period,
(b) there is a difference (“the accounting difference”) between—
(i) the accounting value of the original asset at the end of the earlier period, and
(ii) the sum of the accounting values of the resulting assets at the beginning of the later period,
(c) no election under section 730 (writing down at fixed rate: election for fixed-rate basis) has been or is subsequently made in respect of the original asset, and
(d) no such election is subsequently made in respect of any of the resulting assets.
(2) If the accounting difference is an increase, a corresponding credit must be brought into account for tax purposes in the later period.
(3) If the accounting difference is a decrease, a corresponding debit must be brought into account for tax purposes in the later period.
(4) The credit or debit is—
D
×
WDVE
AVE
where—
D is the accounting difference,
WDVE is the tax written-down value of the original asset at the end of the earlier period, and
AVE is the accounting value of that asset at the end of that period.
(5) But if subsection (2) applies the credit must not exceed—
(a) the sum of the debits brought into account for tax purposes in respect of the original asset before the later period, less
(b) the sum of the credits so brought into account.
(6) This section is subject to section 878 (exclusion of credits or debits brought into account under other provisions).
875 Effect of application of section 874 in later period and subsequently
(1) A credit or debit that is required to be brought into account under section 874 is treated as arising at the beginning of the later period (“the relevant time”).
(2) If section 874(2) applies, the tax written-down value of each resulting asset at the relevant time is—
(
WDVE
+
C
)
×
AV
TAV
where—
WDVE is the tax written-down value of the original asset at the end of the earlier period,
C is the credit,
AV is the accounting value of the resulting asset in question at the relevant time, and
TAV is the sum of the accounting values of all the resulting assets at the relevant time.
(3) If section 874(3) applies, the tax written-down value of each resulting asset at the relevant time is—
(
WDVE
-
D
)
×
AV
TAV
where—
WDVE, AV and TAV have the same meaning as in subsection (2), and
D is the debit.
(4) After the relevant time the cost recognised for tax purposes for each resulting asset is taken to be the sum of—
(a) the tax written-down value given by subsection (2) or, as the case may be, subsection (3), and
(b) the cost recognised for tax purposes of any subsequent expenditure on the asset that is capitalised for accounting purposes.
(5) After the relevant time the tax written-down value for each resulting asset is determined taking account only of subsequent credits and debits.
876 Original asset subject to fixed-rate writing down
(1) This section applies if—
(a) the change of accounting policy results in an intangible fixed asset of the company that was treated as one asset (“the original asset”) in the earlier period being treated as two or more assets (“the resulting assets”) in the later period, and
(b) an election under section 730 (writing down at fixed rate: election for fixed-rate basis) has been or is subsequently made in respect of the original asset.
(2) That election has effect—
(a) in relation to the original asset, for periods up to and including the earlier period, and
(b) in relation to each of the resulting assets, for the later period and subsequent periods.
(3) The tax written-down value of each resulting asset at the beginning of the later period (“the relevant time”) is—
WDVE
×
AVL
TAVL
where—
WDVE is the tax written-down value of the original asset at the end of the earlier period,
AVL is the accounting value of the asset in question at the beginning of the later period, and
TAVL is the sum of the accounting values of all the resulting assets at the beginning of that period.
(4) After the relevant time the cost recognised for tax purposes for each resulting asset is the sum of—
(a) the tax written-down value given by subsection (3), and
(b) the cost recognised for tax purposes of any subsequent expenditure on the asset that is capitalised for accounting purposes.
(5) After the relevant time the tax written-down value for each resulting asset is determined taking account only of subsequent credits and debits.
877 Election for fixed-rate writing down in relation to resulting asset
(1) This section applies if—
(a) the change of accounting policy results in an intangible fixed asset of the company that was treated as one asset (“the original undivided asset”) in the earlier period being treated as two or more assets (“the resulting assets”) in the later period, and
(b) no election under section 730 (writing down at fixed rate: election for fixed-rate basis) has been or is subsequently made in respect of the original undivided asset.
(2) An election under that section may be made in respect of any of the resulting assets.
(3) But such an election may be made only within the period during which such an election could have been made in relation to the original undivided asset.
(4) The effect of the election is that—
(a) the original undivided asset is treated as if it had at all material times consisted of as many assets (“notional original assets”) as there are resulting assets,
(b) each notional original asset is taken to be the same asset as one of the resulting assets (its “corresponding resulting asset”),
(c) the appropriate proportion of every amount falling to be taken into account in relation to the original undivided asset is attributed to each of the notional original assets, and
(d) this Part applies in relation to each of the notional original assets and its corresponding resulting asset accordingly.
(5) For the purposes of subsection (4)(c) the appropriate proportion of every amount falling to be taken into account in relation to the original undivided asset that is to be attributed to each notional original asset is found by reference to the notional original asset's corresponding resulting asset.
(6) The appropriate proportion in relation to each resulting asset is—
AVL
TAVL
where—
AVL is the accounting value of that resulting asset at the beginning of the later period, and
TAVL is the sum of the accounting values of all the resulting assets at the beginning of that period.
878 Exclusion of credits or debits brought into account under other provisions
(1) A credit or debit is not required to be brought into account under this Chapter so far as a credit or debit representing the accounting difference in question is brought into account for tax purposes under a provision specified in subsection (2).
(2) Those provisions are—
(a) section 723 (revaluation),
(b) section 725 (reversal of previous accounting loss), or
(c) section 732 (reversal of previous accounting gain).
879 Subsequent events affecting asset subject to adjustment under this Chapter
(1) On a further change of accounting policy affecting an intangible fixed asset in relation to which this Chapter has applied, the previous provisions of this Chapter apply again.
(2) On a subsequent part realisation affecting the asset in question, section 744 (effect of part realisation of asset) applies.
(1) This Chapter contains special rules about the debits to be brought into account by a company for tax purposes in respect of relevant assets.
(2) In this Chapter “relevant asset” means—
(a) goodwill in a business or part of a business,
(b) an intangible fixed asset that consists of information which relates to customers or potential customers of a business or part of a business,
(c) an intangible fixed asset that consists of a relationship (whether contractual or not) between a person carrying on a business and one or more customers of that business or part of that business,
(d) an unregistered trade mark or other sign used in the course of a business or part of a business, or
(e) a licence or other right in respect of an asset within any of paragraphs (a) to (d).
(1) This section applies if a company acquires or creates a relevant asset on or after 1 April 2019.
(2) The company is to be treated as having made an election under section 730 to write down the cost of the asset for tax purposes at a fixed rate.
(3) In its application in relation to the asset, section 731 (writing down at fixed rate: calculation) has effect as if in subsection (1)(a) for “4%” there was substituted “ 6.5% ”.
(4) The Treasury may by regulations amend subsection (3) so as to alter the percentage substituted for 4%.
879C Restrictions on debits: pre-FA 2019 relevant assets
(1) This section applies in respect of a relevant asset of a company if it is a pre-FA 2019 relevant asset.
(2) No debits in respect of the asset are to be brought into account by the company for tax purposes under Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy).
(3) Any debit in respect of the asset that is brought into account by the company for tax purposes under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit.
(4) Sections 879D to 879H set out the cases in which a relevant asset of a company is a pre-FA 2019 relevant asset for the purposes of this Chapter.
For the purposes of this Chapter a relevant asset of a company is a pre-FA 2019 relevant asset if—
(a) the company acquired or created the asset during the period beginning with 8 July 2015 and ending with 31 March 2019, and
(b) the asset was a chargeable intangible asset in relation to the company at any time during the period beginning with 29 October 2018 and ending with 31 March 2019.
(1) For the purposes of this Chapter a relevant asset of a company (“C”) is a pre-FA 2019 relevant asset if—
(a) another company acquired or created the asset during the period beginning with 8 July 2015 and ending with 31 March 2019,
(b) it was a chargeable intangible asset in relation to that other company at any time during the period beginning with 29 October 2018 and ending with 31 March 2019, and
(c) C acquired the asset on or after 1 April 2019 otherwise than in case A or case B from a person who was a related party in relation to C.
(2) Case A is where—
(a) C acquired the asset from a company that was within the charge to corporation tax at the time of the acquisition, and
(b) the asset was not a pre-FA 2019 relevant asset in the hands of that company immediately before the acquisition.
(3) Case B is where C acquired the asset from a person (“the intermediary”) who acquired the asset on or after 1 April 2019 from a third person—
(a) who was not at the time of the intermediary's acquisition a related party in relation—
(i) to the intermediary, or
(ii) if the intermediary was not a company, to a company in relation to which the intermediary was a related party, and
(b) who is not, at the time of the acquisition by C, a related party in relation to C.
(4) References in this section to one person being (or not being) a related party in relation to another person are to be read as including references to the participation condition being met (or, as the case may be not being met) as between those persons.
(5) References in subsection (4) to a person include a firm in a case where, for section 1259 purposes, references in this section to a company are read as references to the firm.
(6) In subsection (5) “section 1259 purposes” means the purposes of determining under section 1259 the amount of profits or losses to be allocated to a partner in a firm.
(7) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (4) as it applies for the purpose of section 147(1)(b) of TIOPA 2010.
(1) For the purposes of this Chapter a relevant asset of a company (“C”) is a pre-FA 2019 relevant asset if—
(a) the relevant asset was created on or after 29 October 2018,
(b) C acquired the relevant asset on or after 1 April 2019 from a person (“the transferor”) who was a related party in relation to C at the time of the acquisition,
(c) the value of the relevant asset derives in whole or in part from another asset (“the other asset”), and
(d) the other asset meets the preserved status condition (see section 879G).
(2) But if only part of the value of the relevant asset derives from the other asset—
(a) the relevant asset is to be treated for the purposes of this Chapter as if it were two separate assets—
(i) one representing the part of the value of the relevant asset that does so derive, and
(ii) the other representing the part of the value of the relevant asset that does not so derive, and
(b) subsection (1) applies only in relation to the separate asset representing the part of the value of the relevant asset that does so derive.
(3) For the purposes of this section the cases in which the value of a relevant asset may be derived from another 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.
(4) Section 879G supplements this section.
(1) For the purposes of section 879F the other asset meets the preserved status condition if subsection (2) or (3) applies.
(2) This subsection applies if the other asset—
(a) was acquired or created by a company during the period beginning with 8 July 2015 and ending with 31 March 2019, and
(b) was a chargeable intangible asset in the hands of that company at any time during the period beginning with 29 October 2018 and ending with 31 March 2019 when—
(i) that company and C were related parties, or
(ii) that company and the transferor were related parties.
(3) This subsection applies if the other asset was a pre-FA 2019 relevant asset in the hands of a company at any time during the period beginning with 1 April 2019 and ending with the acquisition mentioned in section 879F(1)(b) when—
(a) that company and C were related parties, or
(b) that company and the transferor were related parties.
(4) It does not matter for the purposes of section 879F(1)(a) who created the relevant asset.
(5) Any apportionment necessary for the purposes of section 879F(2) must be made on a just and reasonable basis.
(6) Section 879E(4) to (7) applies for the purposes of section 879F and this section.
(7) Expressions used in this section have the same meaning as in section 879F.
(1) For the purposes of this Chapter a relevant asset of a company is a pre-FA 2019 relevant asset if—
(a) the company acquired the asset on or after 1 April 2019 directly or indirectly in consequence of, or otherwise in connection with, a disposal of a relevant asset by another person, and
(b) the asset disposed of would have been a pre-FA 2019 relevant asset in the hands of the company had the person transferred it to the company at the time of the disposal.
(2) For the purposes of this section it does not matter whether—
(a) the asset disposed 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.
879I Restrictions on debits: no business or no qualifying IP assets acquired
(1) This section applies in respect of a relevant asset of a company if the company acquires the asset on or after 1 April 2019 otherwise than as part of the acquisition of a business.
(2) This section also applies in respect of a relevant asset of a company if—
(a) the company acquires the asset on or after 1 April 2019 as part of the acquisition of a business, and
(b) the company does not acquire any qualifying IP assets as part of the acquisition of the business for use on a continuing basis in the course of the business.
(3) No debits in respect of the asset are to be brought into account by the company for tax purposes under Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy).
(4) Any debit in respect of the asset that is brought into account by the company for tax purposes under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit.
(1) In section 879I “qualifying IP asset”, in relation to a company, means an intangible fixed asset that meets the following two conditions.
(2) The first condition is that the asset is—
(a) a patent, registered design, copyright or design right, plant breeders' right, or right under section 7 of the Plant Varieties Act 1997,
(b) a right under the law of a country or territory outside the United Kingdom corresponding or similar to a right within paragraph (a), or
(c) a licence or other right in respect of anything within paragraph (a) or (b).
(3) The second condition is that in the hands of the company the asset—
(a) is not to any extent excluded from this Part by Chapter 10, and
(b) is not a pre-FA 2002 asset (see section 881).
(4) The reference in subsection (2)(c) to a licence or other right does not include a licence or other right that permits the use of computer software but does not permit its manufacture, adaptation or supply.
(5) The Treasury may by regulations amend the meaning of qualifying IP asset for the purposes of this Chapter.
879K Restrictions on debits: acquisition from individual or firm
(1) This section applies in respect of a relevant asset of a company if—
(a) the company acquires the asset on or after 1 April 2019 directly or indirectly from an individual or firm (“the transferor”),
(b) the related party condition is met, and
(c) the third party acquisition condition is not met.
(2) The related party condition is met if—
(a) in a case where the transferor is an individual, the transferor is a related party in relation to the company at the time of the acquisition;
(b) in a case where the transferor is a firm, any individual who is a member of the transferor is a related party in relation to the company at that time.
(3) The third party acquisition condition is met if—
(a) in a case where the relevant asset is goodwill—
(i) the transferor acquired all or part of the relevant business in one or more third party acquisitions as part of which the transferor acquired goodwill, and
(ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business;
(b) in a case where the relevant asset is not goodwill—
(i) the transferor acquired the relevant asset in a third party acquisition, and
(ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business.
(4) No debits in respect of the asset are to be brought into account by the company for tax purposes under Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy).
(5) Any debit in respect of the asset that is brought into account by the company for tax purposes under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit.
879L Meaning of relevant business and third party acquisition
(1) This section applies for the purposes of section 879K(3).
(2) “Relevant business” means—
(a) in a case where the relevant asset is within paragraph (e) of subsection (2) of section 879A, the business or (as the case may be) the part of the business mentioned in the paragraph of that subsection within which the licensed asset falls, and
(b) in any other case, the business or (as the case may be) the part of the business mentioned in the paragraph of that subsection within which the relevant asset falls.
(3) The transferor acquires something in a “third party acquisition” if—
(a) the transferor acquires it from a company (“C”) and, at the time of that acquisition—
(i) if the transferor is an individual, the transferor is not a related party in relation to C, or
(ii) if the transferor is a firm, no individual who is a member of the transferor is a related party in relation to C, or
(b) the transferor acquires it from a person (“P”) who is not a company and, at the time of that acquisition—
(i) if the transferor is an individual, P is not connected with the transferor, or
(ii) if the transferor is a firm, no individual who is a member of the transferor is connected with P.
(4) But an acquisition is not a “third party acquisition” if—
(a) its main purpose, or one of its main purposes, is for any person to obtain a tax advantage (within the meaning of section 1139 of CTA 2010), or
(b) it occurs during the period beginning with 8 July 2015 and ending with 31 March 2019.
(5) In this section “connected” has the same meaning as in Chapter 12 (see section 842).
879M When the partial restrictions apply: qualifying IP assets
(1) Section 879O (the partial restrictions on debits) applies in respect of a relevant asset (“the asset concerned”) of a company if—
(a) the company acquires the asset concerned on or after 1 April 2019 as part of the acquisition of a business,
(b) the company also acquires qualifying IP assets as part of the acquisition of the business for use on a continuing basis in the course of the business, and
(c) the amount in subsection (3) is less than 1.
(2) But section 879O does not apply in respect of the asset concerned if either of the following sections applies in respect of it—
(a) section 879C (restrictions on debits: pre-FA 2019 relevant assets);
(b) section 879K (restrictions on debits: acquisition from individual or firm).
(3) The amount is—
A × N B
where—
A is the expenditure incurred by the company for or in connection with the acquisition of the qualifying IP assets mentioned in subsection (1)(b),
B is the expenditure incurred by the company for or in connection with the acquisition of the asset concerned and any other relevant assets acquired with the business, and
N is 6.
(4) The Treasury may by regulations amend the meaning of N.
(5) In this section—
“expenditure” means expenditure that is—
capitalised for accounting purposes, or
recognised in determining the profit or loss of the company concerned without being capitalised for accounting purposes,
subject to any adjustments under this Part or Part 4 of TIOPA 2010;
“qualifying IP asset” has the same meaning as in section 879I (see section 879J).
879N When the partial restrictions apply: acquisition from individual or firm
(1) Section 879O (the partial restrictions on debits) also applies in respect of a relevant asset of a company if—
(a) the company acquires the asset on or after 1 April 2019 directly or indirectly from an individual or firm (“the transferor”),
(b) the related party condition is met,
(c) the third party acquisition condition is met, and
(d) the amount in subsection (6) is less than 1.
(2) But section 879O does not apply in respect of the relevant asset if either of the following sections applies in respect of it—
(a) section 879C (restrictions on debits: pre-FA 2019 relevant assets);
(b) section 879I (restrictions on debits: no business or no qualifying IP assets acquired).
(3) The related party condition is met if—
(a) in a case where the transferor is an individual, the transferor is a related party in relation to the company at the time of the acquisition;
(b) in a case where the transferor is a firm, any individual who is a member of the transferor is a related party in relation to the company at that time.
(4) The third party acquisition condition is met if—
(a) in a case where the relevant asset is goodwill—
(i) the transferor acquired all or part of the relevant business in one or more third party acquisitions as part of which the transferor acquired goodwill, and
(ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business;
(b) in a case where the relevant asset is not goodwill—
(i) the transferor acquired the relevant asset in a third party acquisition, and
(ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business.
(5) Section 879L (meaning of relevant business and third party acquisition) applies for the purposes of this section.
(6) The amount is—
A B
where—
A is the relevant accounting value of third party acquisitions (see subsections (7) to (9)), and
B is the expenditure incurred by the company for or in connection with the acquisition of the relevant asset that is—
capitalised by the company for accounting purposes, or
recognised in determining the company's profit or loss without being capitalised for accounting purposes,
subject to any adjustments under this Part or Part 4 of TIOPA 2010.
(7) In a case in which the relevant asset is goodwill, the relevant accounting value of third party acquisitions is the notional accounting value of the goodwill mentioned in subsection (4)(a)(i) (“the previously acquired goodwill”).
(8) In a case in which the relevant asset is not goodwill, the relevant accounting value of third party acquisitions is the notional accounting value of the relevant asset.
(9) The “notional accounting value” of the previously acquired goodwill, or the relevant asset, is what its accounting value would have been in GAAP-compliant accounts drawn up by the transferor—
(a) immediately before the relevant asset was acquired by the company, and
(b) on the basis that the relevant business was a going concern.
(1) Where this section applies in respect of a relevant asset of a company, the following restrictions have effect.
(2) If a debit in respect of the relevant asset is to be brought into account by the company for tax purposes under a provision of Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy), the amount of that debit is—
D × RA
where—
D is the amount of the debit that would be brought into account disregarding this section (and, accordingly, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is to be disregarded), and
RA is the relevant amount (see subsection (6)).
(3) If, but for this section, a debit in respect of any of the relevant assets would be brought into account by the company for tax purposes under a provision of Chapter 4 (realisation of intangible fixed assets), the following two debits are to be brought into account under that provision instead—
(a) a debit determined in accordance with subsection (4), and
(b) a debit determined in accordance with subsection (5), which is to be treated for the purposes of Chapter 6 as a non-trading debit (“the non-trading debit”).
(4) The amount of the debit determined in accordance with this subsection is—
D × RA
where—
D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (and, accordingly, for the purposes of any calculation of the tax written down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is to be disregarded), and
RA is the relevant amount (see subsection (6)).
(5) The amount of the non-trading debit is—
D − TD
where—
D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (but, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is not to be disregarded), and
TD is the amount of the debit determined in accordance with subsection (4).
(6) In this section the “relevant amount” means—
(a) in a case where this section applies in respect of the relevant asset by reason only of section 879M, the amount in subsection (3) of that section;
(b) in a case where this section applies in respect of the relevant asset by reason only of section 879N, the amount in subsection (6) of that section;
(c) in a case where this section applies in respect of the relevant asset by reason of both section 879M and 879N, the amount found by multiplying the amount in subsection (3) of section 879M by the amount in subsection (6) of section 879N.
(1) A company that acquires a relevant asset in pursuance of an unconditional obligation under a contract is to be treated for the purposes of this Chapter as having acquired the asset on the date on which the company became subject to that obligation or (if later) the date on which that obligation became unconditional.
(2) An obligation is unconditional if it may not be varied or extinguished by the exercise of a right (whether under contract or otherwise).
This Chapter—
(a) sets out a general rule limiting the application of this Part to certain assets (see section 882(1): application of this Part to assets created or acquired on or after 1 April 2002),
(b) makes provision about when assets are treated as created or acquired (see sections 883 to 889),
(c) makes special provision about particular kinds of assets (see sections 890 to 897), and
(d) provides how roll-over relief is to apply in some circumstances where assets excluded by the general rule mentioned in paragraph (a) are involved (see sections 898 and 899).
Intangible fixed assets which are excluded from the application of this Part by the general rule mentioned in section 880(a) (subject to any express provision to the contrary) are referred to in this Part as “pre-FA 2002 assets”.
882 Application of this Part to assets created or acquired on or after 1 April 2002
(1) The general rule is that this Part applies to an intangible fixed asset of a company (“the company”) only if one or more of the conditions in subsections (1A) to (1D) is met.
(1A) The condition in this subsection is that the asset is created by the company on or after 1 April 2002.
(1B) The condition in this subsection is that the asset is acquired by the company during the period beginning with 1 April 2002 and ending with 30 June 2020 and either—
(a) it is acquired from a person who at the time of the acquisition is not a related party in relation to the company, or
(b) it is acquired in case A (in subsection (3)), case B (in subsection (4)) or case C (in subsection (5)) from a person who at the time of the acquisition is a related party in relation to the company.
(1C) The condition in this subsection is that the asset is acquired by the company on or after 1 July 2020.
(1D) The condition in this subsection is that the asset is held by the company immediately before 1 July 2020 and at that time the company is not within the charge to corporation tax in respect of the asset.
(1E) But the condition in subsection (1D) is to be treated as not met if—
(a) at any time during the period beginning with 19 March 2020 and ending with 30 June 2020 the asset is a pre-FA 2002 asset in the hands of any company that is within the charge to corporation tax in respect of the asset, and
(b) after that time but during that period the asset is not acquired by any other company from a person who at the time of the acquisition is not a related party in relation to that other company.
(2) For provisions explaining when assets are treated as created or acquired, see sections 883 to 889.
(3) Case A is where the asset is acquired from a company in relation to which the asset was a chargeable intangible asset immediately before the acquisition.
(4) Case B is where the asset is acquired from a person (“the intermediary”) who acquired the asset on or after 1 April 2002 from a third person—
(a) who was not at the time of the intermediary's acquisition a related party in relation—
(i) to the intermediary, or
(ii) if the intermediary was not a company, to a company in relation to which the intermediary was a related party, and
(b) who is not, at the time of the acquisition by the company, a related party in relation to the company.
(5) Case C is where the asset was created on or after 1 April 2002 by the person from whom it is acquired or any other person.
(5A) References in this section to one person being (or not being) a related party in relation to another person are to be read as including references to the participation condition being met (or, as the case may be, not met) as between those persons.
(5B) References in subsection (5A) to a person include a firm in a case where, for section 1259 purposes, references in this section to a company are read as references to the firm.
(5C) In subsection (5B) “section 1259 purposes” means the purposes of determining under section 1259 the amount of profits or losses to be allocated to a partner in a firm.
(5D) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (5A) as it applies for the purposes of section 147(1)(b) of TIOPA 2010.
(6) The general rule in subsection (1) is subject to—
(a) section 890 (fungible assets: application of section 858),
(b) section 892 (certain assets acquired on transfer of a business),
(c) section 893 (assets whose value derives from pre-FA 2002 assets),
(d) section 895 (assets acquired in connection with disposals of pre-FA 2002 assets),
(e) section 897 (application to pre-FA 2002 assets consisting of telecommunication rights),
(f) sections 898 and 899 (application of roll-over relief in relation to some pre-FA 2002 assets), and
(g) section 905 (pre-FA 2002 assets: Lloyd's syndicate capacity).
(7) This section does not restrict the application of this Part in accordance with section 896 (application to royalties) (but see section 896(3)).
883 Assets treated as created or acquired when expenditure incurred
(1) This section—
(a) applies for the purposes of section 882 (application of this Part to assets created or acquired on or after 1 April 2002), and
(b) has effect subject to the provisions specified in subsection (2).
(2) The provisions referred to in subsection (1)(b) are—
(a) section 884 (... goodwill: time of creation),
(b) section 885 (assets representing non-qualifying expenditure: time of creation), and
(c) section 886 (assets representing production expenditure on films: time of creation).
(3) An intangible asset ... is treated as created or acquired on or after 1 April 2002 so far as expenditure on its creation or acquisition is incurred on or after that date.
(3A) An intangible asset is treated as acquired on or after 1 July 2020 so far as expenditure on its acquisition is incurred on or after that date.
(3B) An intangible asset is treated as acquired during the period beginning with 1 April 2002 and ending with 30 June 2020 so far as expenditure on its acquisition is incurred during that period.
(3C) An intangible asset is treated as acquired during the period beginning with 19 March 2020 and ending with 30 June 2020 so far as expenditure on its acquisition is incurred during that period.
(4) As to when expenditure on the creation or acquisition of the asset is incurred ... , see sections 887 to 889.
(5) If by reason of any of subsections (3) to (3C) of this section this Part would apply to an intangible fixed asset of a company to a limited extent only, the asset is to be treated as if it consisted of two separate assets—
(a) one asset being an asset to which this Part applies, and
(b) one asset being an asset to which the alternative enactments apply.
(6) In subsection (5) “the alternative enactments” means the enactments that apply where this Part does not apply.
(7) Any apportionment necessary for the purposes of subsection (5) must be made on a just and reasonable basis.
For the purposes of section 882 (application of this Part to assets created or acquired on or after 1 April 2002) ... goodwill is treated as created —
(a) before (and not on or after) 1 April 2002 in a case in which the business in question was carried on at any time before that date by the company or a related party, and
(b) on or after 1 April 2002 in any other case.
885 Assets representing non-qualifying expenditure: time of creation
(1) This section—
(a) applies for the purposes of section 882 (application of this Part to assets created or acquired on or after 1 April 2002), and
(b) applies to an ... asset representing non-qualifying expenditure.
(2) In this section “non-qualifying expenditure” means expenditure that under the law as it was before 1 April 2002 is not qualifying expenditure for the purposes of any allowance under CAA 2001.
(3) If only part of the expenditure on the creation or acquisition of the asset is non-qualifying expenditure, this Part applies as if there were separate assets representing the non-qualifying expenditure and the other expenditure.
(4) If this Part does not apply to the asset representing the non-qualifying expenditure, the alternative enactments also apply as if there were a separate asset representing that expenditure.
(5) In subsection (4) “the alternative enactments” means the enactments that apply where this Part does not apply.
(6) Any apportionment necessary for the purposes of subsection (3) or (4) must be made on a just and reasonable basis.
(7) An asset to which this section applies is treated for the purposes of section 882 as created —
(a) before (and not on or after) 1 April 2002 in a case in which the asset in question was held at any time before that date by the company or a related party, and
(b) on or after 1 April 2002 in any other case.
886 Assets representing production expenditure on films: time of creation
(1) In determining for the purposes of this Part whether an asset representing production expenditure on a film was created before 1 April 2002 or on or after that date, the asset is treated as created when the film is completed.
(2) In this section—
(a) “completed” has the same meaning as in Part 15 (see section 1181(5)),
(b) “film” has the same meaning as in that Part (see section 1181), and
(c) “production expenditure” has the same meaning as in that Part (see section 1184).
(1) For the purposes of section 883 (assets treated as created or acquired when expenditure incurred) the general rule is that expenditure on the acquisition of an asset is treated as incurred when it is recognised for accounting purposes.
(2) This is subject to—
section 888 (cases where chargeable gains rule applies), and
section 889 (cases where capital allowances general 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 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 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
(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 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.
892 Certain assets acquired on transfer of business or transfer within a group
(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,
(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—
(a) section 139 of TCGA 1992 (reconstruction involving transfer of business),
(b) section 140A of that Act (transfer or division of UK business), ...
(c) section 140E of that Act (merger leaving assets within UK tax charge), and
(d) section 171 of that Act (transfers within a group).
(3) In the hands of the transferee the asset is treated for the purposes of this Part as a pre-FA 2002 asset.
(4) This section does not apply if the transfer mentioned in subsection (1) occurred before 28 June 2002.
(5) If the transfer mentioned in subsection (1) occurred before 1 July 2020, this section applies as if paragraph (d) of subsection (2) were omitted.
893 Assets whose value derives from pre-FA 2002 assets
(1) This section applies if—
(a) during the period beginning with 1 April 2002 and ending with 30 June 2020 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 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 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
(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 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.
(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 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
(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
(c) the transferor.
(4) It does not matter for the purposes of section 893(1)(b) who created the acquired asset.
(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.
(6A) Section 882(5A) to (5D) applies for the purposes of section 893 and this section.
(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,
(b) at any time before 1 July 2020 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 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 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.
(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.
(5) Section 882(5A) to (5D) applies for the purposes of this section.