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HMRC internal manual

Corporate Intangibles Research and Development Manual

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HM Revenue & Customs
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Telecommunications licences and rights: how the legislation works: receipts from disposals

When a taxpayer disposes of a licence or right to which the rules apply the receipt will be treated as a revenue item if:

  • it may be credited in calculating the profit or loss for accounting purposes,
  • this is in accordance with GAAP, and
  • this is how it has been credited in any statutory accounts of the taxpayer.

Example

On 1 January 2001 Bari and Partners (a firm) acquires an IRU for £20 million. In its accounts it amortises the expenditure at £1 million a year. Assume that this is in accordance with GAAP.

On 1 January 2005 when the IRU has been written down to £16 million Bari and Partners sells the IRU for £18 million. In the year ended 31 December 2005 the firm credits a profit on disposal of £2 million in calculating its profit for accounting purposes. Assume that this is in accordance with GAAP.

Bari and Partners are trading and the profit on disposal of £2 million will form part of its trading profits for tax purposes for the year ended 31 December 2005.

Meaning of ‘disposal’

For the purposes of FA00/SCH23, ‘disposal’ also includes:

  • The cancellation or restriction of rights attached to an existing right.
  • The granting of a derivative right or the extension of derivative rights.