Transfers treated as being at market valueU.K.
845Transfer between company and related party treated as at market valueU.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), F3...]
(d)section 849 (transfers involving gifts of business assets) [F4, and
(e)section 849A (disincorporation relief: transfer values for post-FA 2002 goodwill).]
(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
F1Word in s. 845(4)(c) omitted (19.7.2011) by virtue of Finance Act 2011 (c. 11), Sch. 13 paras. 7(a), 31
F2S. 845(4)(ca) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 7(b), 31
F3Word in s. 845(4)(ca) omitted (with effect in accordance with s. 61(6) of the amending Act) by Finance Act 2013 (c. 29), s. 61(4)(a)
F4S. 845(4)(e) and word inserted (with effect in accordance with s. 61(6) of the amending Act) by Finance Act 2013 (c. 29), s. 61(4)(b)
846Transfers not at arm's lengthU.K.
(1)Section 845 does not apply if the consideration for the transfer—
(a)falls to be adjusted for tax purposes under [F5Part 4 of TIOPA 2010] (provision not at arm's length), or
(b)falls within [F6that Part] without falling to be so adjusted.
(2)For the purposes of subsection (1)(b) the consideration for a transfer falls [F7within that Part] without falling to be adjusted under it if—
[F8(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.
[F9(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 [F10as in that Part (see, respectively, sections 149 and 151 of TIOPA 2010)].
Textual Amendments
F5Words 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)
F6Words 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)
F7Words 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)
F8S. 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)
F9S. 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)
F10Words 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)
847Transfers involving other taxesU.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)[F11Chapter 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
F11Words 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)
848Tax-neutral transfersU.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).
[F12848AAssets held for purposes of exempt foreign permanent establishmentsU.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
F12S. 848A inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 8, 31
849Transfers involving gifts of business assetsU.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.
[F13849ADisincorporation relief: transfer values for post-FA 2002 goodwillU.K.
(1)This section applies where—
(a)a company transfers its business to some or all of the shareholders of the company, and
(b)a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013.
(2)If section 735 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—
(a)the tax written-down value of the goodwill, and
(b)its market value.
(3)If section 736 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—
(a)the cost of the goodwill, and
(b)its market value.
(4)If section 738 applies to the transfer of the goodwill of the business, the proceeds of realisation of the goodwill are treated for the purposes of this Part as being nil.
(5)In subsection (2)(a) the reference to the tax written-down value of the goodwill is to its tax written-down value immediately before the transfer.
(6)In subsection (3)(a) “the cost of the goodwill” means the cost recognised for tax purposes (determined in accordance with section 736(6) and (7)).
(7)In this section market value has the meaning given in section 845(5).]
Textual Amendments
F13S. 849A inserted (with effect in accordance with s. 61(6) of the amending Act) by Finance Act 2013 (c. 29), s. 61(5)