Finance Act 2002

Transfer between company and related party treated as being at market value

92 (1) Where there is a transfer of an intangible asset from a company to a related party or to a company from a related party and, in either case, the asset is a chargeable intangible asset—

(a) in relation to the transferor immediately before the transfer, or

(b) in relation to the transferee immediately after the transfer,

the transfer is treated for all purposes of the Taxes Acts (as regards both the transferor and the transferee) as being at market value.

This is subject to the following two exceptions.

(2) The first exception is where the consideration for the transfer—

(a) falls to be adjusted for tax purposes under Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length), or

(b) falls within that Schedule without falling to be so adjusted.

(3) For the purposes of sub-paragraph (2)(b) the consideration for a transfer falls within Schedule 28AA to the Taxes Act 1988 without falling to be adjusted under that Schedule in a case where—

(a) the conditions in paragraph 1(1) of that Schedule are met,

(b) the actual provision does not differ from the arm’s length provision, and

(c) if the actual provision had differed from the arm’s length provision in such a way as to confer a potential advantage in relation to United Kingdom taxation as defined in paragraph 5(1) of that Schedule, paragraph 5(2) of that Schedule would not have applied (under which there is taken to be no such potential advantage if certain conditions are met).

(4) The second exception is where any provision of this Schedule applies so as to make the transfer tax-neutral.

(5) In sub-paragraph (1) “market value” means the price the asset might reasonably be expected to fetch on a sale in the open market.