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HMRC internal manual

Company Taxation Manual

Residence: outward company or permanent establishment migration: liabilities arising: deferral of exit charges: exit charge payment plan: realisation method: outline

The realisation method is more complex than the instalment method:

  • the ECPP tax must be allocated on an item by item basis
  • there are detailed rules prescribing when realisation occurs for intangible and fixed assets, loan relationships and derivative contracts
  • CG chargeable assets are realised on disposal
  • maximum deferral period is ten years.

For this method the company needs to provide further information. It must:

  • identify the assets, and where appropriate the liabilities, in respect of which income, profits or gains arise under the various exit charges, and the amount of deferred tax that is to be attributed to each of the exit charge assets and liabilities. This attribution is to be made in proportion to the income, profits or gains arising on each of the assets and liabilities, no amount being attributed to assets or liabilities that have contributed to the making of a loss;
  • specify extra details for the purposes of determining the period over which tax will be payable in relation to intangible fixed assets, loan relationships and derivative contracts. The company must include in the ECPP details of the remaining term of a financial instrument or the remaining life of intangible fixed assets as at the date of migration.

Intangible fixed assets for this purpose includes assets that are pre-FA02 assets for the purposes of CTA09/PART8.

CTM34136 sets out how tax may be deferred under the realisation method for different classes of asset or liability.