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HMRC internal manual

Corporate Intangibles Research and Development Manual

Intangible assets: groups: tax-neutral transfers: points to watch


Non-resident group members

Companies that are not resident in the UK may be members of a group for the purposes ofSchedule 29. But the transfer of an asset between a UK resident member and a non-resident member will not satisfy the ‘chargeable intangible asset’ requirement (CIRD40250) unless the asset is held for the purposes of a trade carried on in the UK through a permanent establishment in the UK by the non-resident group member. And where both group members are not resident in the UK the asset must be held for those purposes by both.

It may be necessary to consider the transfer pricing rules where intra group transactions involve non-resident companies in circumstances where tax neutral treatment is not available (see CIRD48040).

(FA03/S153 (1) substituted the words ‘permanent establishment’ for ‘branch or agency’ effective for all accounting periods beginning on or after 1 January 2003.)

Asset not chargeable intangible asset in the hands of the transferor

Goodwill and intangible assets failing the time test (CIRD11500 onwards) in the hand of the transferor will also fail the ‘chargeable intangible asset’ requirement. But in those circumstances the no gain/no loss rules in the CG code may well be in point. See CG45305.

Where an asset fails the time test in the hands of the transferor it will continue to do so in the hands of the transferee. This is because the asset will have been:

  • one in existence prior to 1 April 2002 (or else it would have satisfied the time test in the hands of the transferor), and
  • acquired from a ‘related party’ after that date - see CIRD11625 onwards.

Transaction between group members not involving the transfer of an asset

As explained in CIRD40250 not all transactions involving the realisation of a chargeable intangible asset by one group member in favour of another involve the transfer of an asset. In those circumstances tax neutral treatment is not available but for the same reason the market rule in FA02/SCH29/PARA92 does not apply to the transaction (see CIRD45030).

In these circumstances no adjustment to the terms of the transaction agreed by the parties will normally be necessary for the purposes of Schedule 29.