Corporation Tax Act 2009

Chapter 1U.K.Introduction

IntroductoryU.K.

711Overview of PartU.K.

(1)This Part sets out how a company's gains and losses in respect of intangible fixed assets are calculated and brought into account for corporation tax purposes.

(2)For the meaning of “intangible fixed assets” and rules about the assets to which this Part applies, see—

(a)sections 712 to 715,

(b)Chapter 10 (excluded assets), and

(c)Chapter 16 (pre-FA 2002 assets etc).

(3)For how such gains and losses are calculated and brought into account, see, in particular, Chapter 6 which—

(a)deals with the use of credits and debits in respect of some intangible fixed assets in calculating the profits and losses of trades, businesses and other concerns (see sections 747 to 750),

(b)provides for the calculation of gains and losses where there are credits or debits in respect of other intangible fixed assets (see section 751),

(c)makes gains so calculated subject to the charge to corporation tax on income (see section 752), and

(d)gives an allowance for losses so calculated (see section 753).

(4)For the priority of this Part for corporation tax purposes, see Chapter 18 (under which the general rule is that the amounts brought into account in accordance with this Part in respect of any matter are the only amounts that may be brought into account for corporation tax purposes in respect of it).

(5)This Part operates by reference to the accounts of companies and amounts recognised for accounting purposes.

(6)For the meaning of “amounts recognised for accounting purposes” and other expressions related to accounting and for rules about “GAAP-compliant accounts”, see sections 716 to 719.

(7)Chapters 2 to 6 contain basic rules about the credits and debits to be brought into account for corporation tax purposes in respect of intangible fixed assets.

(8)For rules about particular situations and cases, see—

(a)Chapter 7 (roll-over relief in case of realisation and reinvestment),

(b)Chapters 8 and 9 (groups of companies),

(c)Chapter 11 (transfer of business or trade),

(d)Chapter 12 and 13 (related parties),

(e)Chapter 14 (further provisions relating to miscellaneous cases),

(f)Chapter 15 (adjustments on change of accounting policies),

[F1(fa)Chapter 15A (debits in respect of goodwill and certain other assets),]

[F2(fb)Chapter 16A (debits in respect of assets that were pre-FA 2002 assets etc),

(fc)Chapter 16B (fungible assets),] and

(g)Chapter 17 (insurance companies).

Basic definitionsU.K.

712“Intangible asset”U.K.

(1)In this Part “intangible asset” has the meaning it has for accounting purposes [F3(and includes an internally-generated intangible asset)].

(2)In particular, “intangible asset” includes intellectual property.

(3)For this purpose “intellectual property” means—

(a)any patent, trade mark, registered design, copyright or design right, plant breeders' rights or rights under section 7 of the Plant Varieties Act 1997 (c. 66),

(b)any right under the law of a country or territory outside the United Kingdom corresponding or similar to a right within paragraph (a),

(c)any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value, or

(d)any licence or other right in respect of anything within paragraph (a), (b) or (c).

(4)This section is subject to Chapter 10 (excluded assets).

713“Intangible fixed asset”U.K.

(1)In this Part an “intangible fixed asset”, in relation to a company, means an intangible asset acquired or created by the company for use on a continuing basis in the course of the company's activities.

(2)In this Part “intangible fixed asset” includes an option or other right—

(a)to acquire an intangible asset that would be a fixed asset if it were acquired, or

(b)to dispose of an intangible fixed asset.

(3)This Part applies to an intangible fixed asset whether or not it is capitalised in the company's accounts.

(4)Subsection (3) is subject to any indication to the contrary.

(5)This section is subject to any such provision of regulations under section 854 (finance leasing etc) as is mentioned in section 855(1) (assets to be treated as intangible fixed assets of finance lessor).

714“Royalty”U.K.

In this Part “royalty” means a royalty in respect of the enjoyment or exercise of rights that constitute an intangible fixed asset.

GoodwillU.K.

715Application of this Part to goodwillU.K.

(1)This Part applies to goodwill as it applies to an intangible fixed asset.

(2)Subsection (1) is subject to any indication to the contrary [F4(see, in particular, [F5Chapter 15A (debits in respect of goodwill and certain other assets)).]]

(3)In this Part “goodwill” has the meaning it has for accounting purposes [F6(and includes internally-generated goodwill)].

[F7(4)For the purposes of this Part, goodwill is treated as created in the course of carrying on the business in question.]

Accounting rules and definitionsU.K.

716“Recognised” amounts and “GAAP-compliant accounts”U.K.

(1)References in this Part to an amount “recognised” in determining a company's profit or loss for a period are to—

(a)an amount recognised in—

(i)the company's profit and loss account, income statement or statement of comprehensive income for that period,

(ii)the company's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings for that period, or

(iii)any other statement of items brought into account in calculating the company's profits and losses for that period, and

(b)an amount that would have been so recognised if such an account or statement had been drawn up for that period in accordance with generally accepted accounting practice.

(2)An amount that in accordance with generally accepted accounting practice is shown as a prior period adjustment in any such statement as is mentioned in subsection (1) must be brought into account for the purposes of this Part in calculating the company's profits and losses for the period to which the statement relates.

(3)Subsection (2) does not apply to an amount recognised for accounting purposes by way of correction of a fundamental error.

(4)In this Part “GAAP-compliant accounts” means accounts drawn up in accordance with generally accepted accounting practice.

(5)In the case of a company that is a member of a group, see also section 718.

717Companies without GAAP-compliant accountsU.K.

(1)If a company—

(a)draws up accounts that are not GAAP-compliant accounts, or

(b)does not draw up accounts at all,

this Part applies as if GAAP-compliant accounts had been drawn up.

(2)References in this Part to amounts recognised for accounting purposes are references to the amounts which would have been recognised if GAAP-compliant accounts had been drawn up for the period of account in question and any relevant earlier period.

(3)For this purpose a period of account is relevant to a later period if the accounts for the later period rely to any extent on amounts derived from the earlier period.

718GAAP-compliant accounts: reference to consolidated group accountsU.K.

(1)In determining whether a company's accounts are GAAP-compliant, reference may be made to any view about—

(a)the useful life of an asset, or

(b)the economic value of an asset,

taken for the purposes of consolidated group accounts prepared for any group of companies of which the company is a member.

(2)This section does not apply if the consolidated group accounts—

(a)are drawn up using a different accounting framework from that used for the company's individual accounts, and

(b)as a result are prepared on a basis that, in relation to the matters mentioned in subsection (1), substantially diverges from the basis used in the company's individual accounts.

(3)This section does not apply so far as the consolidated group accounts are prepared—

(a)in accordance with the requirements of the law of a country outside the United Kingdom, and

(b)on a basis that, in relation to the matters mentioned in subsection (1), substantially diverges from generally accepted accounting practice.

719Accounting valueU.K.

In this Part “accounting value”, in relation to an asset, means the net book value (or carrying amount) of the asset recognised for accounting purposes.