Corporation Tax Act 2009

[F1 Partial restrictions on debits U.K.

Textual Amendments

F1 Pt. 8 Ch. 15A inserted (with effect in accordance with Sch. 9 para. 7 of the amending Act) by Finance Act 2019 (c. 1), Sch. 9 para. 6

879M When the partial restrictions apply: qualifying IP assets U.K.

(1) Section 879O (the partial restrictions on debits) applies in respect of a relevant asset (“the asset concerned”) of a company if—

(a) the company acquires the asset concerned on or after 1 April 2019 as part of the acquisition of a business,

(b) the company also acquires qualifying IP assets as part of the acquisition of the business for use on a continuing basis in the course of the business, and

(c) the amount in subsection (3) is less than 1.

(2) But section 879O does not apply in respect of the asset concerned if either of the following sections applies in respect of it—

(a) section 879C (restrictions on debits: pre-FA 2019 relevant assets);

(b) section 879K (restrictions on debits: acquisition from individual or firm).

(3) The amount is—

where—

A is the expenditure incurred by the company for or in connection with the acquisition of the qualifying IP assets mentioned in subsection (1)(b),

B is the expenditure incurred by the company for or in connection with the acquisition of the asset concerned and any other relevant assets acquired with the business, and

N is 6.

(4) The Treasury may by regulations amend the meaning of N.

(5) In this section—

• “expenditure” means expenditure that is—

  (a)

  capitalised for accounting purposes, or

  (b)

  recognised in determining the profit or loss of the company concerned without being capitalised for accounting purposes,

  subject to any adjustments under this Part or Part 4 of TIOPA 2010;

• “qualifying IP asset” has the same meaning as in section 879I (see section 879J).

879N When the partial restrictions apply: acquisition from individual or firm U.K.

(1) Section 879O (the partial restrictions on debits) also applies in respect of a relevant asset of a company if—

(a) the company acquires the asset on or after 1 April 2019 directly or indirectly from an individual or firm (“the transferor”),

(b) the related party condition is met,

(c) the third party acquisition condition is met, and

(d) the amount in subsection (6) is less than 1.

(2) But section 879O does not apply in respect of the relevant asset if either of the following sections applies in respect of it—

(a) section 879C (restrictions on debits: pre-FA 2019 relevant assets);

(b) section 879I (restrictions on debits: no business or no qualifying IP assets acquired).

(3) The related party condition is met if—

(a) in a case where the transferor is an individual, the transferor is a related party in relation to the company at the time of the acquisition;

(b) in a case where the transferor is a firm, any individual who is a member of the transferor is a related party in relation to the company at that time.

(4) The third party acquisition condition is met if—

(a) in a case where the relevant asset is goodwill—

(i) the transferor acquired all or part of the relevant business in one or more third party acquisitions as part of which the transferor acquired goodwill, and

(ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business;

(b) in a case where the relevant asset is not goodwill—

(i) the transferor acquired the relevant asset in a third party acquisition, and

(ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business.

(5) Section 879L (meaning of relevant business and third party acquisition) applies for the purposes of this section.

(6) The amount is—

where—

A is the relevant accounting value of third party acquisitions (see subsections (7) to (9)), and

B is the expenditure incurred by the company for or in connection with the acquisition of the relevant asset that is—

(a)

capitalised by the company for accounting purposes, or

(b)

recognised in determining the company's profit or loss without being capitalised for accounting purposes,

subject to any adjustments under this Part or Part 4 of TIOPA 2010.

(7) In a case in which the relevant asset is goodwill, the relevant accounting value of third party acquisitions is the notional accounting value of the goodwill mentioned in subsection (4)(a)(i) (“the previously acquired goodwill”).

(8) In a case in which the relevant asset is not goodwill, the relevant accounting value of third party acquisitions is the notional accounting value of the relevant asset.

(9) The “notional accounting value” of the previously acquired goodwill, or the relevant asset, is what its accounting value would have been in GAAP-compliant accounts drawn up by the transferor—

(a) immediately before the relevant asset was acquired by the company, and

(b) on the basis that the relevant business was a going concern.

879O The partial restrictions on debits U.K.

(1) Where this section applies in respect of a relevant asset of a company, the following restrictions have effect.

(2) If a debit in respect of the relevant asset is to be brought into account by the company for tax purposes under a provision of Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy), the amount of that debit is—

where—

D is the amount of the debit that would be brought into account disregarding this section (and, accordingly, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is to be disregarded), and

RA is the relevant amount (see subsection (6)).

(3) If, but for this section, a debit in respect of any of the relevant assets would be brought into account by the company for tax purposes under a provision of Chapter 4 (realisation of intangible fixed assets), the following two debits are to be brought into account under that provision instead—

(a) a debit determined in accordance with subsection (4), and

(b) a debit determined in accordance with subsection (5), which is to be treated for the purposes of Chapter 6 as a non-trading debit (“the non-trading debit”).

(4) The amount of the debit determined in accordance with this subsection is—

where—

D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (and, accordingly, for the purposes of any calculation of the tax written down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is to be disregarded), and

RA is the relevant amount (see subsection (6)).

(5) The amount of the non-trading debit is—

where—

D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (but, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is not to be disregarded), and

TD is the amount of the debit determined in accordance with subsection (4).

(6) In this section the “relevant amount” means—

(a) in a case where this section applies in respect of the relevant asset by reason only of section 879M, the amount in subsection (3) of that section;

(b) in a case where this section applies in respect of the relevant asset by reason only of section 879N, the amount in subsection (6) of that section;

(c) in a case where this section applies in respect of the relevant asset by reason of both section 879M and 879N, the amount found by multiplying the amount in subsection (3) of section 879M by the amount in subsection (6) of section 879N.]