CIRD48340 - Intangible assets: avoidance: FA18/S20: intangible asset realisation involving non-monetary receipts

Background

As explained at  CIRD48320, an accounting step-up scheme seeks to take advantage of old CTA09/S846 where it gave priority to transfer pricing adjustments under TIOPA10/PART4.  F(2)A15/S42 amended CTA09/S846 to counter such schemes in relation to transfers (see CIRD48330) but as explained in CIRD48330, that version of CTA09/S846 only applies for periods between 8 July 2015 and 31 December 2025. 

The FA18/S20 amendment to CTA09/S739 (proceeds of realisation) was also a response to variants of this avoidance scheme.  It introduced a market value adjustment where the consideration was non-monetary. The FA18/S20 amendment is summarised in the guidance below.

This rule was also amended by FA26/S47 and the change, effective from 1 January 2026, is summarised at the bottom of the page.

CTA09/S739(1A)

FA18/S20 amended CTA09/S739 to clarify what amounts are to be brought into account as proceeds of realisation for the purpose of computing a credit or debit under CTA09/CHAPTER 4 (Realisation of Intangible Fixed Assets). 

CTA09/S739(1A) provides that where the consideration is wholly or partly non-monetary, the amount to be brought into account is the equivalent in cash to the thing received, based on its market value.  For example; if an Intangible Fixed Asset is exchanged for shares, the proceeds of realisation is the market value of those shares.

The change is effective for transactions occurring on or after 22 November 2017 (and before 1 January 2026), unless the realisation was in respect of an unconditional contractual obligation that existed before that date.


FA26 amendments to CTA09/S739

FA26/S47 amended CTA09/S739 with effect from 1 January 2026, inserting subsection (1B).

CTA09/S739(1B) disapplies CTA09/S739(1A) in relation to a cross-border realisation of an intangible fixed asset, when there is either a:

  • realisation that falls to be adjusted under TIOPA10/PART4, or
  • the realisation is one which would have been subject to transfer pricing, but no transfer pricing adjustment is required.

Broadly speaking the intention is to treat any UK-UK realisations between related parties as being at market value (the basic rule), and any cross-border realisation as being at the arm’s length value. This is achieved by disapplying the market value rule CTA09/S739(1A) and allowing transfer pricing to determine the arm’s length value.


TIOPA10/S151(3) provides that where the consideration received is non-monetary, the arm’s length transfer or grant would be for consideration of a sum of money. 


CTA09/S739(3) provides that where the market value rule applies by virtue of CTA09/S739(1A), because the realisation involved the receipt of something other than money, the amount is not to be adjusted as a result of Part 4 TIOPA 2010.

FA26/S739(4) - definition of 'cross-border'


CTA09/S739(4)(a) defines a cross-border realisation transaction by reference to two broad situations, those situations are where the other party is either

  • a UK resident company with a qualifying permanent establishment outside the UK (CTA09/S749(4)(i)), or
  • a non-UK resident company, individual or firm, except where the non-UK resident company, individual or firm has a permanent establishment in the UK with a relevant connection to the realised asset (CTA09/S739(4)(ii) – (iv)).

CTA09/S739(4)(b) – (c) defines ‘qualifying’ in relation to a related party’s permanent establishment outside the United Kingdom and ‘relevant connection’ in relation to the transferred asset.

CTA09/S739(4)(d) defines “branch or agency”.

CTA09/S739(4)(e) defines “actual provision”, and “arm’s-length provision”.