Finance Act 2002

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

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 [F1 the following four 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 [F2 , but]

(b) the actual provision does not differ from the arm’s length provisionF3 ...

F4 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

[F5 (4A) The third exception is where—

(a) the asset is transferred from the company at less than its market value, or to the company at more than its market value,

(b) the related party—

(i) is not a company, or

(ii) 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,

and

(c) by virtue of any provision of—

(i) section 209 of the Taxes Act 1988 (meaning of “distribution”), or

(ii) Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (employment income: earnings and benefits etc treated as earnings),

the transfer gives rise (or would give rise but for sub-paragraph (1)) to an amount to be taken into account in computing any person’s income, profits or losses for tax purposes.

(4B) Where the third exception applies, sub-paragraph (1) does not apply, in relation to the computation mentioned in sub-paragraph (4A)(c), for the purposes of any such provision as is mentioned there.

(4C) The fourth exception is where—

(a) the asset is transferred to the company, and

(b) on a claim for relief under section 165 of the Taxation of Chargeable Gains Act 1992 (relief for gifts of business assets) in respect of the transfer, a reduction is made under subsection (4)(a) of that section.

(4D) Where the fourth exception applies—

(a) the transfer is treated for the purposes of this Schedule as being at market value less the amount of the reduction;

(b) all such adjustments as may be required, by way of assessment, amendment of returns or otherwise, may be made (notwithstanding any time limit on the making of an assessment or the amendment of a return).]

(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.

Textual Amendments

F1 Words in Sch. 29 para. 92(1) substituted (with effect in accordance with s. 41(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), s. 41(2)(a)

F2 Word in Sch. 29 para. 92(3)(a) inserted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), Sch. 5 para. 16(3)(a)

F3 Word in Sch. 29 para. 92(3)(b) repealed (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), Sch. 5 para. 16(3)(b), Sch. 42 Pt. 2(1)

F4 Sch. 29 para. 92(3)(c) repealed (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), Sch. 5 para. 16(3)(c), Sch. 42 Pt. 2(1)

F5 Sch. 29 para. 92(4A)-(4D) inserted (with effect in accordance with s. 41(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), s. 41(2)(b)