Introduction New Section 849B CTA 2009
4.New section 849B CTA 2009 details the circumstances when the restrictions in either new section 849C or new section 849D will apply to a company claiming relief for debits under Chapters 3 and 4 of Part 8 CTA 2009.
5.Subsection (1) provides that a restriction will only apply where the company acquires a relevant asset directly or indirectly from a related party individual or a firm in which one of the members is a related party individual. The words “directly or indirectly” have been added to the draft that was published on 3 December 2014 to put it beyond doubt that indirect transfers will be subject to the restrictions imposed by new sections 849C and 849D.
6.Subsection (2) defines “relevant asset”. Relevant assets include the goodwill of a business and certain customer-related intangible assets and unregistered trade marks normally associated with the goodwill of a business. This ensures that the same tax treatment will apply where the accounting treatment is to recognise assets closely associated with goodwill separately from goodwill.
7.Subsection (2)(e) includes a license in respect of a relevant asset to deal with circumstances where the relevant assets are retained by the individual, or a firm, on the incorporation of the business.
8.Subsection (3) defines “the relevant business or part”.
9.Subsections (4) – (6) determine whether either new section 849C or new section 849D applies.
10.Subsection (4) provides that new section 849C will only apply to goodwill to the extent that it was previously acquired from a third party before transfer to the company. Two conditions must be met; first, the transferor must have acquired the relevant business, or part of a business in respect of one or more third party acquisitions, and second, the company must also have acquired that business or part from the transferor.
11.Subsection (5) has the same effect for relevant assets that are not goodwill described in paragraph 10 above.
12.Subsection (6) provides that new section 849D will apply where section 849C does not.
13.Subsection (7) defines “third party acquisition”. Subsections (a) and (b) consider the relationship of the parties at the time the transferor acquired the relevant asset to determine whether it is a third party acquisition.
14.Subsection (a) considers the relationship of the parties where the relevant asset was acquired by the transferor from a company and treats any acquisition from a company who is unrelated as a third party acquisition.
15.Subsection (b) has the same effect as paragraph 14 above in relation to acquisitions from persons who are not a company and who are unconnected.
16.Subsection (8) defines “connected” by reference to section 842 CTA 2009.
17.Subsection (9) is an anti-avoidance rule that treats any acquisition as a non-third party acquisition where it has a main purpose of avoiding tax. The existing anti-avoidance rule at section 864 CTA 2009 can also apply.