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