Section 739 Meaning of “proceeds of realisation”

United Kingdom

(1)

In this Part “proceeds of realisation” of an asset means the amount recognised for accounting purposes as the proceeds of realisation, less the amount so recognised as incidental costs of realisation.

F1(1A)

But if the realisation involved the receipt of something other than money, subsection (1) has effect as if the reference to the amount recognised for accounting purposes as the proceeds of realisation were a reference to the amount that would have been so recognised had the receipt been a receipt of a sum of money equal to the price the thing concerned might reasonably have been expected to fetch on a sale in the open market.

F2(1B)

Subsection (1A) does not apply to a realisation by a company if—

(a)

either—

(i)

as a result of Part 4 of TIOPA 2010 (transfer pricing), the profits and losses of the company are to be calculated for tax purposes as if the arm's length provision in relation to the realisation had been made or imposed instead of the actual provision in relation to it, or

(ii)

those profits would be so calculated if the actual provision conferred a potential advantage in relation to United Kingdom taxation (within the meaning of that Part) on the company and differed from the arm’s length provision, and

(b)

the realisation is a cross-border realisation.

See also section 151(3) of that Part for provision about applying the arm’s length provision in relation to intangible fixed assets.

(2)

The amounts referred to in subsection (1) are subject to any adjustments required by this Part or F3Part 4 of TIOPA 2010 (provision not at arm's length).

F4(3)

But where subsection (1A) applies in relation to an amount recognised for accounting purposes, that amount is not to be adjusted as a result of any adjustment required by Part 4 of TIOPA 2010.

(4)

For the purposes of subsection (1B)—

(a)

a realisation is a cross-border realisation if, at the time of the realisation, the other party to the realisation transaction is—

(i)

a UK resident company, but only if it has a qualifying permanent establishment in a territory outside the United Kingdom,

(ii)

a non-UK resident company, other than a non-UK resident company that has a permanent establishment in the United Kingdom with a relevant connection to the transaction,

(iii)

a non-UK resident individual, other than an individual that carries on a trade, profession or vocation in the United Kingdom through a branch or agency where the transaction is for the purposes of that trade, profession or vocation, or

(iv)

a partnership, but only if all of its members are non-UK resident or it has a qualifying permanent establishment in a territory outside the United Kingdom.

(b)

where the other party has a permanent establishment in a territory outside the United Kingdom, that permanent establishment is “qualifying” if—

(i)

exemption adjustments under section 18A(1) of CTA 2009 (exemption for profits or losses of foreign permanent establishments) would be made in calculating the taxable profits of the other party, and

(ii)

those adjustments would include adjustments in respect of the realisation transaction,

(c)

a permanent establishment of the other party in the United Kingdom has a relevant connection to the realisation transaction if the transaction is, in accordance with Chapter 4 of Part 2, attributable to that permanent establishment,

(d)

“branch or agency”—

(i)

means any factorship, agency, receivership, branch or management, but

(ii)

does not include any person within any of the exemptions under sections 835G to 835K of ITA 2007 (persons who are not UK representatives).

(e)

“actual provision” and “arm’s length provision” are to be construed in accordance with Part 4 of TIOPA 2010 (transfer pricing).

Annotations

Textual amendments

F1: S. 739(1A) inserted (with application in accordance with s. 20(2) of the amending Act) by Finance Act 2018 (c. 3), s. 20(1)
F2: S. 739(1B) inserted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 24(2), 28
F3: Words in s. 739(2) 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)
F4: S. 739(3)(4) inserted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 24(3), 28

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)