Autumn Budget 2017: Intangible fixed assets - related party step-up schemes

This measure will ensure that the market value rule will apply to an intangible fixed asset licence granted between related parties.
Currently, this applies where intangible fixed assets are disposed of for something other than cash, or transferred to a related party via a licensing arrangement.

The market value rule requires that the amount recognised as proceeds is equivalent to the amount of cash that would be received if the transaction were at market value.

As a license does not involve a transfer of the underlying asset, previously the market value rule did not apply. This was because the asset subject to the license was retained by the licensor.

The new rules will ensure that a license granted between related parties will also be subject to the market value rule. A company granting a licence to a related party will be prevented from recognising less than the market value of the licence. Additionally, for the recipient entity, the market value rule will prevent the company recognising a tax cost higher than the market value of the licence. Amendments to the market value rule will prevent manipulation of the transaction price in relation to related party licences to avoid unfair tax advantages.

Further information on the impact of the Budget can be found here.
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