Capital gains: consideration other than cash: licence swaps - mixed consideration received - disposals made on or after 22 April 2009
- two companies each dispose of one or more UK licences to each other by way of a bargain at arm’s length,
- at least one of the licences relates to a developed area, and
- one of the disposals is part of the consideration given for the other disposal (that is, a licence(s) is swapped for a licence(s) and other consideration),
then the tax treatment of the company that receives the mixed consideration depends on whether the no gain/no loss amount (N) of that company exceeds the amount of non-licence consideration (C) (for example cash) received by that company. Such a transaction is described as a mixed-consideration swap.
Where N does exceed C
- where that company acquires only one licence, the company is treated as if it had acquired the licence for a consideration of N-C,
- where that company acquires two or more licences, the company is treated as if the cost of each licence acquired is that proportion of (N-C) that the value of each licence acquired bears to the total value of all the licences acquired (TCGA92\S195C).
The disposal by that company of a licence under the swap is viewed as a no gain/no loss disposal after taking account of indexation allowance. This no gain/no loss disposal is not included in the list of ‘the no gain/no loss provisions’ in TCGA92\S288(3A).
Where N does not exceed C
Where N does not exceed C for the company that receives the mixed consideration the acquisition cost of each licence acquired by that company is treated as nil, and
- where that company disposes of only one licence, the company is treated as achieving a gain of C-N on the disposal,
- where that company disposes of two or more licences, the company is treated as achieving a gain on each disposal of that proportion of (C-N) that the value of each licence disposed of bears to the total value of all the licences disposed of (TCGA92\S195D).
See OT30139 for the tax treatment of expenditure incurred by a company on a licence disposed of under a mixed-consideration swap and reimbursed by the company to whom the disposal is made.