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HMRC internal manual

Corporate Intangibles Research and Development Manual

HM Revenue & Customs
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Core computational rules: deductible debits: relief for capitalised expenditure on an intangible asset: acquired as part of a larger bargain: just and reasonable apportionment

CTA09/PART8/S856 (4)

Circumstances where GAAP acquisition accounting not followed

In some circumstances the company acquiring them may not have attempted an exercise of allocating fair values to individual assets acquired together in accordance with GAAP. This may be because:

  • the assets acquired do not form a business entity and therefore the acquisition is outside the scope of the standards, or
  • the company is not subject to UK accounting standards or IAS (see CIRD30110).

Just and reasonable apportionment

In such cases the values to be allocated to intangible assets (or goodwill in cases a business entity is acquired) for the purposes of Part 8 are to be determined on a just and reasonable apportionment of the total consideration. The apportionment reflected in the accounting treatment actually adopted, so long as it is intended to show a true and fair view, will nevertheless often be acceptable. But in these circumstances it is not decisive.

A just and reasonable apportionment will also be required where accounts that purport to allocate fair values to assets do not succeed in doing so.

The requirement that a just and reasonable apportionment should be made also applies to:

  • the values to be used for corporation tax by the acquiring company in relation to the other assets purchased as part of the same bargain
  • the values placed on assets within Part 8 in the tax computations of the company disposing of them

See the guidance in other manuals referred to in CIRD12730.

Where valuation of intangible assets is an issue see CIRD10240.