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HMRC internal manual

Corporate Intangibles Research and Development Manual

Intangible assets within CTA09/PART8: FA02 rule exceptions: fungible assets: introduction

CTA09/PART8/S858 and S890 - 891

General treatment of fungible assets under section 858

‘Fungible assets’ are defined in S858 as assets of a nature to be dealt in without identifying the particular assets involved. An example of such an intangible asset would be milk quota (see CG77701 for more on agricultural quotas). Under the general computational rule in S858, fungible assets of the same kind are treated as a single asset.

So for the purposes of CTA09/PART8 the acquisition of additional assets of that kind is regarded as increasing the size of the single asset rather than as the acquisition of separate assets (see CIRD12720). Conversely the disposal of some but not all of the units comprising the single asset amounts to the part realisation of that asset (see CIRD13230).

Background to commencement rules for fungible assets

Under the general rule described above, where fungible assets of a particular kind are held by a company prior to 1 April 2002 any additional assets of that kind acquired subsequently would fail the general conditions of the FA02 rule (see CIRD11500) - the acquisitions would be regarded as merely enlarging a pre-FA 2002 asset.

On the other hand, the nature of fungible assets is such that it could often be relatively straightforward for a company to dispose of an asset of this kind held prior to 1 April 2002 and replace it immediately afterwards with a newly acquired, identical asset. CTA09/PART8 is not intended to apply to assets recycled in this way.

Special commencement rules

S890 and 891 therefore contain provisions:

  • to enable the FA02 rule to be satisfied by fungible assets acquired on or after 1 April 2002 which are additions to assets of the same kind, even though the latter fail the general conditions (see CIRD11770),
  • to counter the recycling of assets described above, as well as the exploitation of the rule about additions (see CIRD11780).