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HMRC internal manual

Corporate Intangibles Research and Development Manual

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Intangible assets: groups: degrouping: intra group payments for reinvestment relief and reallocation of taxable credit

FA02/SCH29/PARA71

Outline

One company may make a payment to another group member as consideration for:

  • taking into account expenditure by the latter in a reinvestment relief claim (see CIRD20400 onwards), or
  • for the reallocation of a degrouping charge (CIRD40705).

Paragraph 71 provides that these payments are left out of account for CT so long as they are made in the circumstances described below.

Payments for group reinvestment relief - meaning

A payment for group reinvestment relief means a payment from a company, whose proceeds of realisation are reduced as a result of the claim, to the company whose acquisition costs or tax written down value are reduced in connection with the claim. The claims referred to are those made under FA02/SCH29/PARA56 (realisation by one group company and reinvestment by another - see CIRD20410), or FA02/SCH29/PARA57 (acquisition of group company treated as equivalent to acquisition of underlying assets -see CIRD20420). The payment should be made in pursuance of anagreement between the companies.

Payments for reallocation of a taxable credit on degrouping - meaning

A payment for the reallocation of a taxable credit on degrouping (as provided for in FA02/SCH29/PARA66 - see CIRD40705) means a payment from the company to which the credit initially arises to the company to which, as a result of a joint election, the credit is reallocated. The payment should be made in pursuance of an agreement between the companies.

Payments for relief or reallocation - treatment

A payment as referred to above:

  • does not affect the profits or losses of either company for CT purposes, and
  • is not regarded as a distribution or a charge on income for CT purposes,

as long as it does not exceed ‘the amount of the relief’ (see below).

Amount of the relief

The amount of the relief is:

  • for the purposes of paragraph 56 - the amount of the reduction in the acquisition costs in respect of the gain rolled over,
  • for the purposes of paragraph 57 - the amount of the reduction in the tax written down value of the assets in respect of the rolled over gain,
  • for the purposes of paragraph 66 - the amount treated as accruing to a company as the result of the reallocation election.