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HMRC internal manual

Corporate Intangibles Research and Development Manual

Intangible assets excluded from Schedule 29 as special tax rules apply: except as regards royalties: assets held for mutual trade or business



In accordance with case law, profits and losses of a mutual trade are excluded from the computation of income for CT (see CTM40950 onwards). But capital assets of a mutual trade, including intangible fixed assets and goodwill, remain within the CG code. These assets could have been excluded altogether from the scope of CT had they been brought into an income regime by virtue of Schedule 29.

Effect of provision

Paragraph 79 ensures that the status quo is preserved. Capital assets remain subject tothe CG rules. And both incoming and outgoing royalties arising in the course of a mutual trade remain income matters, falling within the case law exclusion for mutual profits.

Since the income from mutual life assurance business is already within the charge to CT it is outside paragraph 79 and therefore subject to the separate exclusion in paragraph 78(see CIRD25115).

Mutual property business

The rule in paragraph 79 extends to a mutual ‘business’ as well as a mutual ‘trade’ and therefore in terms could apply to a mutual property business within Schedule A. But ICTA88/S21C requires the profits of a mutual Schedule A business to be computed as if the relationship of mutuality between the parties to the business did not exist. The goodwill and intangible fixed assets of such a business therefore fall within Schedule 29 in the ordinary way.

Asset ceases or begins to be held for mutual trade or business

FA02/SCH29/PARA108 and PARA110 make special provision for the case where goodwill or intangible fixed assets cease or begin to be held for a mutual trade or business. See CIRD12745 and CIRD13270.