Commentary

D1.601B Corporate intangible regime and related party transactions

Corporate tax
Corporate tax | Commentary

D1.601B Corporate intangible regime and related party transactions

Corporate tax | Commentary

D1.601B Corporate intangible regime and related party transactions

Corporate intangible regime and relevance of related party

The concept of related party is important in the corporate intangible regime in several areas as follows:

  1.  

    •     whether the intangible is within the corporate intangible regime, see D1.601A

  2.  

    •     if the intangible is goodwill or certain customer-related assets then depending on the date of acquisition or creation there are restrictions on the tax relief if the goodwill was acquired from a related party, see the summary in D1.629A

  3.  

    •     rollover relief on realisation of intangibles and reinvestment, see D1.635

  4.  

    •     whether the market value rule applies on transfers, see D1.611A

  5.  

    •     royalty payments (see below)

The definition of related party is determined by:

  1.  

    •     whether there is control or a major interest between the parties

  2.  

    •     taking into account all the rights and powers of the related parties, and

  3.  

    •     all the rights and powers of persons connected to the related parties

these concepts are detailed further below.

Royalties payments to a related party

Where a royalty is payable by a company to (or for the benefit of) a related party, the royalty is deductible for corporation tax purposes only when it is paid, if1:

  1.  

    •     the related party is not within the charge to corporation tax under the corporate intangible regime in respect of the royalty receivable, and

  2.  

    •     the royalty is not paid in full within 12 months of the end of the period in which the amount payable is recognised in determining the

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial