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HMRC internal manual

Corporate Intangibles Research and Development Manual

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Intangible assets: international issues: company ceases to be resident in UK: deferral of taxable credit: subsequent part-realisation of asset

FA02/SCH29/PARA109 (2)

Where recovery of the credit deferred under the rules described in CIRD47040 is triggered by the subsequent realisation of the asset in question and the realisation is only a part realisation then only a proportion of the credit is recovered. Similarly, on a further part realisation, only a proportion of the balance of the deferred credit is recovered. If subsequently the part of the asset retained is itself realised (within the six year period), or the 75% subsidiary relationship is broken, then the so far unrecovered part of the credit is taxed.

Example

Assume that a company ceases to be resident in the UK and elects for a credit arising under the rule described in CIRD47030 to be deferred. The amount of the deferred credit is £1000. There is subsequently a part realisation of the asset. Its market value at that time is £1500 and the value of the part retained £1000.

The proportion of the credit to be taxed is that proportion of the postponed credit thatthe reduction in the market value of the asset as a result of the part realisation bears to its market value beforehand. That is £1000 x [(£1500 - £1000) / £1500] = £333.

Assume now a second part realisation where the market value of the asset immediately beforehand is £1000 (i.e. unchanged) and that of the part retained £200.

The credit to be taxed is £667 x [(£1000 - £200) / £1000] = £534.

That leaves £133 of the credit [£1000 - (£333 + £534)] to be taxed on the occurrence of a further event triggering the recovery of the credit.