Finance Act 2002

Realisation of asset shown in balance sheet and not written down for tax purposes

21 (1) This paragraph applies where there is a realisation of an intangible fixed asset for which a value is shown in the company’s balance sheet but which is not within paragraph 20 (asset written down for tax purposes).

(2) Where this paragraph applies—

(a) if the proceeds of realisation exceed the cost of the asset, a credit equal to the excess shall be brought into account for tax purposes;

(b) if the proceeds of realisation are less than the cost of the asset, a debit equal to the shortfall shall be brought into account for tax purposes; and

(c) if there are no proceeds of realisation, a debit equal to the cost of the asset shall be brought into account for tax purposes.

(3) The cost of the asset means the cost recognised for tax purposes.

(4) Subject to any adjustment required for tax purposes, the cost of the asset recognised for tax purposes is the same as the amount of expenditure on the asset capitalised by the company for accounting purposes.

(5) After a part realisation of the asset the references in sub-paragraph (2)(a), (b) and (c) to the cost of the asset shall be read as a reference to—

(a) the cost recognised for tax purposes in respect of the value of the asset recognised for accounting purposes immediately after the part realisation, and

(b) the cost so recognised of any subsequent expenditure on the asset that is capitalised for accounting purposes.

(6) On a further part realisation, sub-paragraph (5) applies again.