OpenLegislation

Section 849AB Grant of licence or other right treated as at market valueF1

United Kingdom

(1)

This section applies if—

(a)

a company which holds an intangible asset grants a licence or other right in respect of the asset to a related party, or

(b)

a company is granted a licence or other right in respect of an intangible asset by a related party that holds the asset.

(F21A)

But this section does not apply in relation to a person (either the company or the related party) if—

(a)

either—

(i)

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

(ii)

they 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 person, and

(b)

the grant is a cross-border grant.

(1B)

A grant is a cross-border grant if, at the time of the grant, the related party is—

(a)

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

(b)

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 licence or other right that is the subject of the grant,

(c)

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 that has a relevant connection to the licence or other right that is the subject of the grant, or

(d)

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.

(1C)

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

(a)

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 related party, and

(b)

those adjustments would include adjustments in respect of the licence or other right that is the subject of the grant.

(1D)

A permanent establishment of the related party in the United Kingdom has a relevant connection to the licence or other right that is the subject of the grant if the licence or other right is, in accordance with Chapter 4 of Part 2, attributable to that permanent establishment.

(1E)

A branch or agency of the related party has a relevant connection to the licence or other right that is the subject of the grant if—

(a)

where the related party is the grantor, if the asset from which the licence or other right is derived was used or held for the purposes of the branch or agency immediately before the grant, or

(b)

where the related party is the grantee, the licence or other right was acquired for use by, to be held by or for the purposes of, the branch or agency.

(1F)

In this section “branch or agency”—

(a)

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

(b)

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

(2)

The grant of the licence or other right is treated for all purposes of the Taxes Acts as being at market value as respects the grantor if—

(a)

the licence or other right was actually granted at less than market value, and

(b)

condition A or B is met.

(3)

The grant of the licence or other right is treated for all purposes of the Taxes Acts as being at market value as respects the grantee if—

(a)

the licence or other right was actually granted at more than market value, and

(b)

condition A or B is met.

(4)

Condition A is that the asset is a chargeable intangible asset in relation to the grantor immediately before the licence or right in respect of it is granted.

(5)

Condition B is that the licence or right is a chargeable intangible asset in relation to the grantee immediately after it is granted.

(6)

This section is subject to—

F3(a)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

section 849AD (grants involving other taxes)F4, and

(c)

section 900F (special rules in respect of assets that were pre-FA 2002 assets etc).

(7)

References in subsection (1) to a related party in relation to a company are to be read as including references to a person in circumstances where the participation condition is met as between that person and the company.

(8)

References in subsection (7) to a company include a firm in a case where, for the purposes of section 1259, references in subsection (1) to a company are read as references to the firm.

(9)

Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (7) as it applies for the purposes of section 147(1)(b) of TIOPA 2010.

(10)

Subsection (11) applies where—

(a)

a gain on the grant by a firm of a licence or other right in respect of an intangible fixed asset is a gain to be taken into account for the purposes of section 1259, and

(b)

for those purposes, references in subsection (1) to a company are read as references to the firm.

(11)

Where this subsection applies, the gain referred to in subsection (10)(a) is to be treated for the purposes of this section as if it were a chargeable realisation gain for the purposes of section 741(1) (meaning of “chargeable intangible asset”).

(12)

In this section—

  • F5“actual provision” and “arm’s length provision” are to be construed in accordance with Part 4 of TIOPA 2010 (transfer pricing),

  • “market value” means the price the licence or right might reasonably be expected to fetch on a sale in the open market, and

  • “the Taxes Acts” means the enactments relating to income tax, corporation tax or chargeable gains.

Annotations

Textual amendments

F1

Ss. 849AB-849AD and cross-heading inserted (with application in accordance with s. 21(3) of the amending Act) by Finance Act 2018 (c. 3), s. 21(2)

F2

S. 849AB(1A)-(1F) inserted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 26(2), 28

F3

S. 849AB(6)(a) omitted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 26(3), 28

F4

S. 849AB(6)(c) and word inserted (with effect in accordance with s. 31(14)(15) of the amending Act) by Finance Act 2020 (c. 14), s. 31(4)(b)

F5

Words in s. 849AB(12) inserted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 26(4), 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)