CIRD48350 - Intangible assets: avoidance: related party licence not granted at market value between 22 November 2017 and 31 December 2025 - interaction with transfer pricing

CTA09/S849AB-AD

FA18/S21 introduced new legislation at CTA09/S849AB – AD. This extended the market value rule used in CTA09/S845 to a licence in respect of an intangible asset granted between related parties.   

Those rules ensured that related parties cannot convey the economic benefit of an intangible fixed asset by means of a licence, and obtain a tax advantage by manipulating the price of that licence.  This change was effective from 22 November 2017 and this guidance covers the periods to 31 December 2025. The rules were amended from 1 January 2026 by FA26/S47 , and the new rules are described at CIRD45050.


For periods 22 November 2017 to 31 December 2025

It was expected that most related party licence arrangements would come within the rules of TIOPA10/PART4. A market value adjustment under CTA09/S849AB - AD would only apply where:

  • the licence was not granted at market value, and
  • an adjustment under TIOPA10/PART4 was less than the market value adjustment (CTA09/S849AC(3)).

When the rule applies


CTA09/S849AB applies either:

  • to companies granting a licence in respect of an intangible fixed asset to a related party at less than market value (CTA09/S849AB(2)), or
  • to companies who have been granted a licence in respect of an intangible fixed asset by a related party at above market value (CTA09/S849AB(3)).

For periods between 22 November 2017 and 31 December 2025 it is subject to CTA09/S849AC (see below).


CT09/S849AC


An adjustment may be due under TIOPA2010/PART4 or CTA09/S849AB. CTA09/S849AB is subject to CTA09/S849AC. It follows that adjustments required under the TIOPA10/PART4 rules must be considered before establishing whether adjustments are required under CTA09/S849AB.

Where adjustments are due under TIOPA2010/PART4 and CTA09/S849AB, CTA09/S849AC provides that the greater adjustment is brought into account.

For practical examples see CIRD48360.


CT09/S849AD


The application of the market value rule is modified in relation to grants involving other taxes (CTA09/S849AD). It does not apply to grants giving rise to a distribution or employment income charge on any person under CTA10/PART23 (distributions) or Part 3 of ITEPA (employment income). This replicates the rule in CTA09/S847 for transfers (see CIRD45033).

Market Value

Market value is defined by CTA09/S849AB(12):

“Market value” means the price the licence or right might reasonably be expected to fetch on a sale in the open market’. “Sale” in this context is synonymous with grant. 

For guidance on how to apply market value to the grant of a licence see CIRD45055.