Part 8U.K.Intangible fixed assets

Chapter 14U.K.Miscellaneous provisions

Grants and other contributions to expenditureU.K.

852Treatment of grants and other contributions to expenditureU.K.

(1)This section applies if a grant or other payment is intended by the payer to meet, directly or indirectly, expenditure of a company on an intangible fixed asset.

(2)A gain recognised in the company's profit and loss account in respect of the grant or other payment is treated for the purposes of section 721 (receipts recognised as they accrue) as a gain representing a receipt in respect of the intangible fixed asset.

(3)This section does not apply to a grant within section 853.

853Grants to be left out of account for tax purposesU.K.

(1)This section applies to the following grants (“exempt grants”)—

(a)grants under Part 2 of the Industrial Development Act 1982 (c. 52) (regional development grants), and

(b)grants made under Northern Ireland legislation and declared by the Treasury by order to correspond to a grant under that Part.

(2)A gain in respect of an exempt grant to a company is ignored for the purposes of this Part, even though it is recognised in determining the company's profit or loss.

(3)This subsection applies if, as a result of an exempt grant being brought into account by the company to which it is made, there is a reduction—

(a)in the amount of a loss recognised in determining the company's profit or loss, or

(b)in the amount of expenditure on an intangible fixed asset that is capitalised for accounting purposes.

(4)If subsection (3) applies, the amount of the reduction is added back for the purposes of this Part.

Finance leasingU.K.

854Finance leasing etcU.K.

(1)The Treasury may make provision by regulations as to the application of this Part in relation to a company that is the finance lessor of an intangible asset that is the subject of a finance lease.

(2)Section 855 is about the provision that the regulations may make.

(3)References in this section and that section to a finance lease—

(a)have the meaning they have for accounting purposes, and

(b)include hire-purchase, conditional sale or other arrangements if they are of a similar character to a finance lease.

(4)References to the finance lessor or finance lessee have a corresponding meaning.

(5)Regulations under this section may be made so as to have effect from 1 April 2002.

855Further provision about regulations under section 854U.K.

(1)Regulations under section 854 may provide that this Part applies as if the asset were an intangible fixed asset of the finance lessor and not a financial asset, even though the asset is accounted for by the finance lessor as a financial asset.

(2)The regulations may provide that this Part applies as if the amount at which the asset is recognised in the finance lessor's balance sheet were capitalised expenditure on an intangible fixed asset, but that—

(a)no election may be made under section 730 (writing down at fixed rate: election for fixed-rate basis) in respect of that amount, and

(b)that amount is not to be treated as capitalised expenditure for the purposes of section 756(2) (roll-over relief in case of realisation and reinvestment: conditions to be met in relation to expenditure on other assets).

(3)The regulations may provide that if an asset formerly recognised by the finance lessor for accounting purposes as an intangible fixed asset becomes subject to a finance lease (and so comes to be accounted for as a financial asset), the value of the asset so created is recognised as realisation proceeds of the intangible fixed asset on the change of accounting treatment.

(4)The regulations may provide that assets partially excluded from this Part by sections 810 to 813 F1... (assets excluded except as respects royalties) are entirely excluded from this Part as respects the finance lessor if they—

(a)are subject to a finance lease, and

(b)are accounted for by the finance lessor as financial assets.

(5)The regulations may provide for excluding from the regulations assets used by the finance lessee for the purposes of a trade or business in respect of which the finance lessee is liable to income tax.

(6)The regulations may provide that an intangible asset counts as a pre-FA 2002 asset in the hands of the finance lessor if the finance lessee is—

(a)a company for which the asset was the whole or part of a pre-FA 2002 asset, or

(b)a person who is a related party in relation to such a company.

(7)The regulations may make incidental, supplemental, consequential and transitional provision and savings.

(8)That provision may include modifications of the operation of other provisions of the Corporation Tax Acts.

Values to be used in special casesU.K.

856Assets acquired or realised togetherU.K.

(1)Any reference in this Part to the acquisition or realisation of an asset includes a reference to the acquisition or realisation of that asset together with other assets.

(2)For the purposes of this Part assets acquired or realised as a result of one bargain are treated as acquired or realised together even though—

(a)separate prices are, or purport to be, agreed for separate assets, or

(b)there are, or purport to be, separate acquisitions or realisations of separate assets.

(3)If assets are acquired together, any values allocated to particular assets by the company in accordance with generally accepted accounting practice must be accepted for the purposes of this Part.

(4)If no such values are so allocated, so much of the expenditure as on a just and reasonable apportionment is properly attributable to each asset is treated for the purposes of this Part as referable to that asset.

(5)If assets are realised together, so much of the proceeds of realisation as on a just and reasonable apportionment is properly attributable to each asset is treated for the purposes of this Part as proceeds of the realisation of that asset.

857Deemed market value acquisition: adjustment where nil accounting valueU.K.

(1)This section applies if—

(a)a company is treated for the purposes of this Part as acquiring an asset at market value, but

(b)the accounting value of the asset transferred is nil in the hands of the transferee.

(2)In such a case any reference in this Part to—

(a)the cost of the asset recognised for accounting purposes,

(b)the accounting value of the asset, or

(c)any loss recognised for accounting purposes in respect of capitalised expenditure on the asset,

is a reference to the cost, value or loss that would have been recognised if the asset had been acquired at market value.

(3)If the asset is revalued, the revaluation is ignored.

(4)In this section “revaluation” has the same meaning as in section 723 (see subsection (5) of that section) and “revalued” must be read accordingly.

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F3858Fungible assetsU.K.

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Assets ceasing to be or becoming chargeable intangible assetsU.K.

859Asset ceasing to be chargeable intangible asset: deemed realisation at market valueU.K.

(1)If an asset ceases to be a chargeable intangible asset in relation to a company in any of the circumstances specified in subsection (2), this Part applies as if—

(a)immediately before the asset ceased to be a chargeable intangible asset in relation to the company, the company had realised the asset for its market value at that time, and

(b)the company had immediately reacquired it at that value.

(2)The circumstances are—

(a)that the company ceases to be UK resident,

(b)in the case of a company that is not UK resident, any circumstances not involving the realisation of the asset by the company, and

(c)that the asset begins to be held for the purposes of a mutual trade or business.

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F5860Asset ceasing to be chargeable intangible asset: postponement of gainU.K.

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F5861Treatment of postponed gain on subsequent realisationU.K.

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F5862Treatment of postponed gain in other casesU.K.

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863Asset becoming chargeable intangible assetU.K.

(1)This section applies if an asset becomes a chargeable intangible asset in relation to a company—

(a)on the company becoming UK resident,

(b)in the case of a company that is not UK resident, on the asset beginning to be held[F6—

(i)]for the purposes of a trade carried on by the company in the United Kingdom through a permanent establishment,

[F7(ii)for the purposes of a trade carried on by the company of dealing in or developing UK land,

(iii)for the purposes of a UK property business carried on by the company, or

(iv)for the purposes of enabling the company to generate other UK property income (within the meaning given by section 5(6)),] or

(c)on the asset ceasing to be held for the purposes of a mutual trade or business.

(2)This Part applies as if—

(a)the company had acquired the asset immediately after it became a chargeable intangible asset in relation to the company, and

(b)had done so for its accounting value at that time.

[F8(3)But subsection (2)(b) is subject to section 863A.]

[F9863AAsset becoming chargeable intangible asset: EU exit chargeU.K.

(1)This section applies if—

(a)an asset becomes a chargeable intangible asset in relation to a company by reason of an event specified in section 863(1)(a) or (b), and

(b)on the occurrence of that event the company becomes subject to an EU exit charge in respect of the asset.

(2)This Part applies as if the company had acquired the asset for its market value at the time it became a chargeable intangible asset in relation to the company.

(3)“EU exit charge” means a charge to tax under the law of a member State in accordance with Article 5(1) of Directive (EU) 2016/1164 of the European Parliament and of the Council of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.]

Matters to be ignoredU.K.

864Tax avoidance arrangements to be ignoredU.K.

(1)In determining whether a credit or a debit is to be brought into account under this Part and, if so, its amount, any tax avoidance arrangements are ignored.

(2)Arrangements are “tax avoidance arrangements” for this purpose if their main object or one of their main objects is to enable a company—

(a)to obtain a debit under this Part to which it would not otherwise be entitled,

(b)to obtain a debit under this Part which exceeds that to which it would otherwise be entitled,

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

(d)to reduce the amount of any such credit.

(3)In this section—

• “arrangements” includes any scheme, agreement or understanding, whether or not it is legally enforceable, and

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

865Debits for expenditure not generally deductible for tax purposesU.K.

(1)No debit may be brought into account for tax purposes under this Part in respect of expenditure that is not generally deductible for tax purposes.

(2)Expenditure is “not generally deductible for tax purposes” so far as revenue expenditure of that description incurred for the purposes of a trade would be non-deductible because of a provision specified in subsection (3).

(3)Those provisions are—

(a)section 56 (car F10... hire),

(b)section 1298 (business entertainment and gifts),

(c)section 1304 (crime-related payments), and

(d)section 246(2) of FA 2004 (expenditure on benefits under employer-financed retirement benefits schemes).

Delayed payments and bad debtsU.K.

866Delayed payment of employees' remunerationU.K.

(1)This subsection applies if—

(a)a debit in respect of employees' remuneration is recognised by a company for accounting purposes, and

(b)apart from this section, a debit in respect of the remuneration could be brought into account for the purposes of this Part for the period of account in which the debit is recognised.

(2)No such debit may be so brought into account unless the remuneration is paid before the end of the period of 9 months beginning with the end of the period of account.

(3)If the remuneration is paid after the end of the 9 month period, the debit may be brought into account for the purposes of this Part for the period of account in which it is paid.

(4)Section 867 makes further provision relating to the application of this section.

867Provisions supplementing section 866U.K.

(1)For the purposes of section 866 a debit in respect of employees' remuneration recognised for accounting purposes includes an amount reserved in the accounts of an employer with a view to its becoming employees' remuneration.

(2)For the purposes of section 866 it does not matter if the debit is in respect of—

(a)particular employments, or

(b)employments generally.

(3)Any adjustment required by section 866 of an accounting debit that is partly referable to an amount to which that section applies and partly to other matters must be made on a just and reasonable basis.

(4)In making a calculation for tax purposes that has to be made before the end of the 9 month period mentioned in section 866(2), it must be assumed that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period.

(5)But if the remuneration is subsequently paid before the end of the period, nothing in subsection (4) prevents the calculation being revised and any tax return being amended accordingly.

(6)For the purposes of section 866 and this section, remuneration is paid when it—

(a)is treated as received by an employee for the purposes of ITEPA 2003 by section 18 or 19 of that Act (receipt of money and non-money earnings), or

(b)would be so treated if it were not exempt income.

(7)In section 866 and this section—

• “employee” includes an office-holder and so “employment” includes an office, and

• “remuneration” means an amount which is or is treated as earnings for the purposes of ITEPA 2003.

868Delayed payment of pension contributionsU.K.

(1)This section applies if—

(a)a debit in respect of pension contributions is recognised by a company for accounting purposes, and

(b)the contributions are not paid until after the end of the period of account in which the debit is recognised.

(2)The contributions may be brought into account for the purposes of this Part only when they are paid.

(3)For the purposes of this section “pension contributions” means—

(a)sums paid by an employer by way of contributions under a registered pension scheme,

(b)sums paid to the trustees or managers of such a scheme that are treated as if they were the payment of contributions under the pension scheme (see section 199 of FA 2004), or

(c)expenses within section 246(3) of FA 2004 (expenditure on benefits under employer-financed retirement benefits schemes).

(4)Any adjustment required by this section of an accounting debit that is partly referable to an amount to which this section applies and partly to other matters must be made on a just and reasonable basis.

869Bad debts etcU.K.

(1)No debit may be brought into account for the purposes of this Part in respect of a debt owed to the company, except—

(a)by way of impairment loss, or

(b)so far as the debt is released as part of a statutory insolvency arrangement.

(2)If a debt is so released, any gain in respect of the release that is brought into account for accounting purposes by the debtor is disregarded for the purposes of this Part.

(3)Any other gain in respect of an unpaid debt in respect of an intangible fixed asset that is brought into account by the debtor for accounting purposes is treated for the purposes of section 721 (receipts recognised as they accrue) as a gain in respect of an intangible fixed asset.

(4)Any adjustment required by this section of an accounting gain or loss that is partly referable to an amount affected by this section and partly to other matters must be made on a just and reasonable basis.

(5)In this section “debt” includes an obligation or liability that falls to be discharged otherwise than by the payment of money.

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F11870Assumptions for calculating chargeable profitsU.K.

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[F12Roll-over relief under TCGA 1992U.K.

870AClaims for relief made under sections 152 and 153 of TCGA 1992U.K.

(1)Subsection (2) applies where—

(a)a company has made a claim for relief under section 152 or 153 of TCGA 1992 (roll-over relief) during the period beginning with 1 April 2009 and ending with 19 March 2014, and

(b)the relief claimed relates to disposal proceeds that are applied in acquiring an intangible fixed asset within the meaning of this Part.

(2)The company is treated for the purposes of this Part as if the cost of the asset recognised for tax purposes were reduced on 19 March 2014 by the amount in respect of which the relief under section 152 or 153 of TCGA 1992 is given.

(3)But the effect of subsection (2) must not be to reduce the tax written-down value of the asset to below nil.

(4)The references to adjustments in sections 742(3) and 743(3) (assets written down) include any adjustment required by subsection (2).]