Part 8Intangible fixed assets
Chapter 4Realisation of intangible fixed assets
733Overview of Chapter
(1)
This Chapter provides for credits or debits to be brought into account for tax purposes on the realisation by a company of an intangible fixed asset.
(2)
For the meaning of “realisation”, see section 734.
(3)
Sections 735 to 738 are subject to Chapter 7 (roll-over relief in case of realisation and reinvestment).
(4)
This Chapter is also relevant for determining—
(a)
whether an asset is a chargeable intangible asset for the purposes of this Part, and
(b)
whether a gain is a chargeable realisation gain for the purposes of this Part.
(5)
For the meaning of “chargeable intangible asset” and “chargeable realisation gain”, see section 741.
734Meaning of “realisation”
(1)
References in this Part to the realisation of an intangible fixed asset are to a transaction resulting, in accordance with generally accepted accounting practice—
(a)
in the asset ceasing to be recognised in the company's balance sheet, or
(b)
in a reduction in the accounting value of the asset.
(2)
In subsection (1) “transaction” includes any event giving rise to a gain recognised for accounting purposes.
(3)
In relation to an intangible fixed asset that has no balance sheet value (or no longer has a balance sheet value), subsections (1) and (2) apply as if it did have a balance sheet value.
(4)
References in this Part to a “part realisation” are to a realisation falling within subsection (1)(b).
735Asset written down for tax purposes
(1)
This section applies if there is a realisation of an intangible fixed asset in respect of which debits have been brought into account for tax purposes.
(2)
If the proceeds of realisation exceed the tax written-down value of the asset, a credit equal to the excess must be brought into account for tax purposes.
(3)
If the proceeds of realisation are less than the tax written-down value of the asset, a debit equal to the shortfall must be brought into account for tax purposes.
(4)
If there are no proceeds of realisation, a debit equal to the tax written-down value must be brought into account for tax purposes.
(5)
References in this section to the tax written-down value of an asset are to its tax written-down value immediately before the realisation.
736Asset shown in balance sheet and not written down for tax purposes
(1)
This section applies if—
(a)
there is a realisation of an intangible fixed asset to which section 735 does not apply, and
(b)
a value is shown for the asset in the company's balance sheet.
(2)
If the proceeds of realisation exceed the cost of the asset, a credit equal to the excess must be brought into account for tax purposes.
(3)
If the proceeds of realisation are less than the cost of the asset, a debit equal to the shortfall must be brought into account for tax purposes.
(4)
If there are no proceeds of realisation, a debit equal to the cost of the asset must be brought into account for tax purposes.
(5)
In this section “the cost of the asset” means the cost recognised for tax purposes.
(6)
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.
(7)
Subsection (6) is subject to any adjustments required by this Part or Schedule 28AA to ICTA (provision not at arm's length)).
(8)
If this section has applied on a part realisation of an asset and applies again (on the realisation of the unrealised asset) the references in subsections (2) to (4) to the cost of the asset must be read as references to the sum of—
(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 recognised for tax purposes of any subsequent expenditure on the asset that is capitalised for accounting purposes.
(9)
If there is a further part realisation, subsection (8) applies again.
737Apportionment in case of part realisation
(1)
In the case of a part realisation—
(a)
the references in section 735 to the tax written-down value of the asset, and
(b)
the references in section 736 to the cost of the asset,
must be read as references to the appropriate proportion of that amount.
(2)
That proportion is—
where—
AVB is the accounting value immediately before the realisation, and
AVA is the accounting value immediately after the realisation.
738Asset not shown in balance sheet
(1)
This section applies if—
(a)
there is a realisation of an intangible fixed asset, and
(b)
neither section 735 (asset written down for tax purposes) nor section 736 (asset shown in balance sheet and not written down for tax purposes) applies.
(2)
A credit equal to any proceeds of realisation must be brought into account for tax purposes.
739Meaning of “proceeds of realisation”
(1)
In this Part “proceeds of realisation” of an asset means the amount recognised for accounting purposes as the proceeds of realisation, less the amount so recognised as incidental costs of realisation.
(2)
The amounts referred to in subsection (1) are subject to any adjustments required by this Part or Schedule 28AA to ICTA (provision not at arm's length).
740Abortive expenditure on realisation
(1)
This section applies if—
(a)
in a period of account a loss is recognised in determining the company's profit or loss in respect of expenditure by the company for the purposes of a transaction,
(b)
the transaction does not proceed to completion, but
(c)
were it completed, it would constitute a realisation of an intangible fixed asset.
(2)
A corresponding debit must be brought into account for tax purposes.
(3)
The amount of the debit is the same as the amount of the loss recognised by the company for accounting purposes.
(4)
Subsection (3) is subject to any adjustments required by this Part or Schedule 28AA to ICTA (provision not at arm's length).
741Meaning of “chargeable intangible asset” and “chargeable realisation gain”
(1)
For the purposes of this Part, an asset is a “chargeable intangible asset” in relation to a company at any time if any gain on its realisation by the company at that time would be a chargeable realisation gain.
(2)
For the purposes of this Part, “chargeable realisation gain”, in relation to an asset, means a gain on the realisation of the asset that gives rise to a credit required to be brought into account under this Chapter.
(3)
For the purposes of subsections (1) and (2), there is a gain on the realisation of an asset in any case if section 735(2), 736(2) or 738(2) applies.
(4)
For the purpose of subsections (1) and (2), ignore any question whether—
(a)
relief under Chapter 7 (roll-over relief in case of realisation and reinvestment) is available, or
(b)
a transfer of an asset is tax-neutral for the purposes of this Part (see section 776).