Section 179: Seller controlled by buyer etc
674.This section ensures that if the seller and buyer are under common control:
the general rule in section 177 does not apply; and
the parties to the transaction may not elect for the payment for know-how not to be treated as a capital payment for goodwill.
675.The section is based on section 531 of ICTA. The corresponding rule for income tax is in section 195 of ITTOIA.
676.For the purposes of this section, “control” is defined in section 840 of ICTA (as applied by section 1316 of this Act). The ICTA definition of “control” is identical in effect to that in section 574 of CAA. But, as the relevance of “control” in this Act goes wider than this Chapter, the ICTA definition is used here.
677.This section is one of the exceptions to the general rule in section 1258 of this Act that a firm is not to be regarded for tax purposes as a separate entity. If a firm is connected with the seller or purchaser of its know-how the payment for know-how is treated as one for goodwill.