Budget Notes

BN23 CORPORATE INTANGIBLE ASSETS REGIME:

ANTIAVOIDANCE

Who is likely to be affected?

1. Companies undertaking transactions in respect of intangible assets.

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to clarify that the effect of the 'related party' rules in the corporate intangible assets regime is unaffected by any administration, liquidation or other insolvency proceedings or equivalent arrangements that any company or partnership may be involved in.

Operative date

3. The measure will have effect for transactions made in respect of intangible assets (including royalties becoming payable) on and after 12 March 2008.

Current law and proposed revisions

4. Schedule 29 to the Finance Act (FA) 2002 provides, broadly, for a particular tax treatment to have effect for companies' intangible fixed assets created on or after 1 April 2002 when the Schedule came into force, or (if created prior to 1 April 2002) transferred between 'unrelated parties' on or after that date. Assets created before 1 April 2002 and transferred between 'related parties' on or after this date are subject to different tax rules. These assets are termed 'existing assets'.

5. There are four tests in paragraph 95 of Schedule 29 to FA 2002 for identifying related parties. Legislation will be introduced in Finance Bill 2008 to clarify that the results of these tests are not affected by any company or partnership being subject to any insolvency arrangements (e.g. liquidation, administration or other insolvency proceedings) or equivalent arrangements.

6. This means that, for the purposes of paragraph 95, all the various rules which are relevant to the tests set out in that paragraph must have effect disregarding any insolvency proceedings involving a company or partnership, or equivalent arrangements. Equivalent arrangements include those where any company or partnership is the subject of a procedure in another law or territory which is equivalent to insolvency arrangements in the United Kingdom. Such proceedings or arrangements must be disregarded whether the company or partnership subject to them is solvent or insolvent, and whether the company or partnership is one of the related parties, or another company or partnership whose circumstances could be relevant to any of the tests in paragraph 95 (such as another member of a group of companies).

Further advice

7. If you have any questions about this change, please contact Kerry Pope on 020 7147 2617 (email: kerry.pope@hmrc.gsi.gov.uk) or Grusheka Lowton 020 7147 2573 (email: grusheka.lowton@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk