Section 729 Writing down on accounting basis

United Kingdom

(1)

If in a period of account a loss is recognised in determining a company's profit or loss in respect of capitalised expenditure on an intangible fixed asset—

(a)

by way of amortisation, or

(b)

as a result of an impairment review,

a corresponding debit must be brought into account for tax purposes.

(2)

The reference in subsection (1) to an “impairment review” does not include the valuation of an asset for the purpose of determining the amount of expenditure to be capitalised in the first place.

(3)

In the period of account in which expenditure on an asset is capitalised the amount of the debit for tax purposes in respect of the expenditure is—

L \times \frac{E}{CE}

where—

L is the amount of the loss recognised for accounting purposes,

E is the amount of expenditure on the asset that is recognised for tax purposes, and

CE is the amount capitalised in respect of expenditure on the asset.

(4)

For the purposes of subsection (3), subject to any adjustments required by this Part or F1Part 4 of TIOPA 2010 (provision not at arm's length), the amount of expenditure on the asset that is recognised for tax purposes is the same as the amount of expenditure on the asset capitalised by the company.

(5)

In a subsequent period of account the amount of the debit for tax purposes in respect of the expenditure on an asset is—

L \times \frac{WDV}{AV}

where—

L is the amount of the loss recognised for accounting purposes,

WDV is the tax written-down value of the asset (see section 742) immediately before the amortisation charge is made or, as the case may be, the impairment loss is recognised for accounting purposes, and

AV is the value of the asset recognised for accounting purposes immediately before the amortisation charge or, as the case may be, the impairment review.

(6)

In this section “capitalised” means capitalised for accounting purposes.

(7)

This section does not apply to an asset in respect of which an election is made under section 730.

Annotations

Textual amendments

F1: Words in s. 729(4) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 145(1), (2) (with Sch. 9 paras. 1-9, 22)

Notes on Part 8

Modifications

C1: Pt. 8 modified (1.1.2010) by Northern Rock plc (Tax Consequences) Regulations 2009 (S.I. 2009/3227), regs. 1, 6(1)
C2: Pt. 8 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)
C3: Pt. 8 modified (1.10.2011) by Postal Services Act 2011 (c. 5), s. 93(2)(3), Sch. 2 para. 6(1); S.I. 2011/2329, art. 3
C4: Pt. 8 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 1(3); S.I. 2012/628, art. 3(b)
C5: Pt. 8 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 3(1); S.I. 2011/2576, art. 5
C6: Pt. 8 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
C7: Pt. 8 modified (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 35, 45 (with Sch. 5 para. 36)