CIRD48330 | Intangible assets: avoidance: measure in F(2)A15/S42: accounting step-up schemes involving transfers before 1 January 2026

CTA09/PART8/S846(1A)-(1C)

As explained at CIRD48320, an accounting step-up scheme sought to take advantage of the old rule CTA09/S846 (pre F(2)A15) which gave priority to transfer pricing under TIOPA10/PART4.

The amendments made to CTA09/S846 by F(2)A15/S42, which only apply to transactions between 8 July 2015 and 31 December 2025, included the insertion of subsections (1A) – (1C). Broadly those amendments allowed the market value to be considered alongside any adjustment to arm’s length required by TIOPA10/PART4. These rules don't apply to transfers occuring on or after 1 January 2026, see CIRD45038 and CIRD45040.

CTA09/S846(1B) was the main provision introduced by F(2)A15/S42. It provided that where an asset is transferred between related parties and the market value amount under CTA09/S845 is higher than the arm’s length amount under TIOPA10/PART4, the difference was brought into account.

Note that where a TIOPA10/PART4 adjustment was made, it was only the difference between the market value and the TIOPA10/PART4 amount that was brought into account by CTA09/S846(1B). This meant that two adjustments may have be required; one under the TIOPA10/PART4 rules and one under CTA09/S846(1B).

As mentioned above, these rules only apply to periods between 8 July 2015 and 31 December 2025. The new rules that apply for transfers on or after 1 January 2026 are covered in CIRD45038 and CIRD45040.

Example

The ‘recognised’ proceeds on the disposal of an intangible asset might be £50. The ‘arm’s length ‘provision under TIOPA10/PART4 is £200 but the market value is £300. The total adjustments are £250. The amount to be brought into account under CTA09/S846(1B) would be the difference (£100) as summarised below:

• £150 under TIOPA10/PART4, and

• £100 under CTA09/S846(1B).