Corporation Tax Act 2009 (c. 4)

Part 8 U.K. Intangible fixed assets

Modifications etc. (not altering text)

C1 Pt. 8 modified (1.1.2010) by Northern Rock plc (Tax Consequences) Regulations 2009 (S.I. 2009/3227), regs. 1, 6(1)

C2 Pt. 8 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)

C3 Pt. 8 modified (1.10.2011) by Postal Services Act 2011 (c. 5), s. 93(2)(3), Sch. 2 para. 6(1); S.I. 2011/2329, art. 3

C4 Pt. 8 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 1(3); S.I. 2012/628, art. 3(b)

C5 Pt. 8 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 3(1); S.I. 2011/2576, art. 5

C6 Pt. 8 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

Chapter 13 U.K. Transactions between related parties

Introductory U.K.

844 Overview of Chapter U.K.

(1) This Chapter sets out special rules relating to transactions between related parties.

(2) Sections 845 to 849 are about the rule that transfers between a company and a related party are treated as being at market value.

(3) Sections 850 and 851 set out other rules for transactions involving related parties.

(4) See Chapter 12 for the meaning of “related parties”.

Transfers treated as being at market value U.K.

845 Transfer between company and related party treated as at market value U.K.

(1) The basic rule is that a transfer of an intangible asset—

(a) from a company to a related party, or

(b) to a company from a related party,

is treated for all purposes of the Taxes Acts as being at market value (as respects both the company and the related party) if condition A or B is met.

(2) Condition A is that the asset is a chargeable intangible asset in relation to the transferor immediately before the transfer.

(3) Condition B is that the asset is a chargeable intangible asset in relation to the transferee immediately after the transfer.

(4) That rule is subject to—

(a) section 846 (transfers not at arm's length),

(b) section 847 (transfers involving other taxes),

(c) section 848 (tax-neutral transfers), F1 ...

[F2 (ca) section 848A (assets held for purposes of exempt foreign permanent establishments), and]

(d) section 849 (transfers involving gifts of business assets).

(5) In subsection (1)—

• “market value” means the price the asset might reasonably be expected to fetch on a sale in the open market, and

• “the Taxes Acts” means the enactments relating to income tax, corporation tax or chargeable gains.

Textual Amendments

F1 Word in s. 845(4)(c) omitted (19.7.2011) by virtue of Finance Act 2011 (c. 11), Sch. 13 paras. 7(a), 31

F2 S. 845(4)(ca) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 7(b), 31

846 Transfers not at arm's length U.K.

(1) Section 845 does not apply if the consideration for the transfer—

(a) falls to be adjusted for tax purposes under [F3 Part 4 of TIOPA 2010] (provision not at arm's length), or

(b) falls within [F4 that Part] without falling to be so adjusted.

(2) For the purposes of subsection (1)(b) the consideration for a transfer falls [F5 within that Part] without falling to be adjusted under it if—

[F6 (a) the condition in section 147(1)(a) of TIOPA 2010 is met,

(aa) the participation condition is met (see subsection (2A)), and]

(b) the actual provision does not differ from the arm's length provision.

[F7 (2A) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (2)(aa) as it applies for the purposes of section 147(1)(b) of TIOPA 2010.]

(3) In subsection (2) “the actual provision” and “the arm's length provision” have the same meaning [F8 as in that Part (see, respectively, sections 149 and 151 of TIOPA 2010)].

Textual Amendments

F3 Words in s. 846(1)(a) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(2) (with Sch. 9 paras. 1-9, 22)

F4 Words in s. 846(1)(b) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(3) (with Sch. 9 paras. 1-9, 22)

F5 Words in s. 846(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(4) (with Sch. 9 paras. 1-9, 22)

F6 S. 846(2)(a)(aa) substituted for s. 846(2)(a) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(5) (with Sch. 9 paras. 1-9, 22)

F7 S. 846(2A) inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(6) (with Sch. 9 paras. 1-9, 22)

F8 Words in s. 846(3) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(7) (with Sch. 9 paras. 1-9, 22)

847 Transfers involving other taxes U.K.

(1) This section applies if—

(a) in a case where section 845(1) applies and the asset is transferred from the company to a related party, the transfer is at less than its market value,

(b) in a case where that section applies and the asset is transferred to the company from the related party, the transfer is at more than its market value, and

(c) conditions A and B apply.

(2) Condition A is that the related party—

(a) is not a company, or

(b) is a company in relation to which the asset is not a chargeable intangible asset immediately after the transfer to it or, as the case may be, immediately before the transfer from it.

(3) Condition B is that the transfer—

(a) gives rise to an amount to be taken into account in calculating any person's income, profits or losses for tax purposes because of a relevant provision, or

(b) would do so apart from section 845(1).

(4) If this section applies, section 845(1) does not apply in relation to the calculation referred to in subsection (3) for the purposes of any relevant provision.

(5) In this section “relevant provision” means—

(a) [F9 Chapter 2 of Part 23 of CTA 2010 (matters which are distributions), except section 1000(2),] and

(b) Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as earnings).

Textual Amendments

F9 Words in s. 847(5)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 658 (with Sch. 2)

848 Tax-neutral transfers U.K.

(1) Section 845 does not apply if the transfer is tax-neutral for the purposes of this Part as a result of any provision in this Part.

(2) For such provisions, see, in particular—

(a) section 775 (transfers within a group), and

(b) sections 818 to 826 (transfer of business or trade).

[F10 848A Assets held for purposes of exempt foreign permanent establishments U.K.

(1) This section applies if—

(a) subsection (1) of section 775 (transfers within a group) would apply in relation to the transfer but for paragraph (c) of subsection (4) of that section, and

(b) the asset has not at all times when the election under section 18A had effect been held by the transferor wholly for the purposes of a permanent establishment such as is mentioned in that paragraph.

(2) The transfer is treated for the purposes of this Part as being at the following value—

where—

WDV is the tax written-down value of the asset, and

FPEA is the amount which, for the purposes of Chapter 3A of Part 2, would in the case of the transferor be the foreign permanent establishments amount attributable to the transfer for the accounting period in which it took place if the transfer were at market value.]

Textual Amendments

F10 S. 848A inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 8, 31

849 Transfers involving gifts of business assets U.K.

(1) This section applies if—

(a) the asset is transferred to the company mentioned in section 845(1), and

(b) on a claim for relief under section 165 of TCGA 1992 (relief for gifts of business assets) in respect of the transfer, a reduction is made under section 165(4)(a).

(2) The transfer is treated for the purposes of this Part as being at market value, less the amount of the reduction.

(3) Any necessary adjustments may be made, by way of assessment, amendment of returns or otherwise, regardless of any relevant time limits.

Other rules U.K.

850 Part realisation involving related party acquisition: exclusion of roll-over relief U.K.

(1) Chapter 7 (roll-over relief in case of realisation and reinvestment) does not apply in relation to the part realisation by a company of an intangible fixed asset if there is a related party acquisition as a result of, or in connection with, the part realisation.

(2) For this purpose there is a related party acquisition if a person who is a related party in relation to the company acquires an interest of any description—

(a) in the intangible fixed asset, or

(b) in an asset whose value is derived in whole or in part from that asset.

851 Delayed payment of royalty by company to related party U.K.

(1) This section applies if—

(a) a royalty is payable by a company to or for the benefit of a related party,

(b) the royalty is not paid in full within the period of 12 months after the end of the period of account in which a debit in respect of it is recognised by the company for accounting purposes, and

(c) credits representing the full amount of the royalty are not brought into account under this Part in any accounting period by the person to whom it is payable.

(2) The royalty is brought into account for the purposes of this Part only when it is paid.