Section 729 — Corporation Tax Act 2009: Writing down on accounting basis

Writing down on accounting basis 729 1 If in a period of account a loss is recognised in determining a company's profit or loss in respect of capitalised expenditure on an intangible fixed asset—

a by way of amortisation, or b as a result of an impairment review, a corresponding debit must be brought into account for tax purposes.

2 The reference in subsection (1) to an “ impairment review ” does not include the valuation of an asset for the purpose of determining the amount of expenditure to be capitalised in the first place.

3 In the period of account in which expenditure on an asset is capitalised the amount of the debit for tax purposes in respect of the expenditure is— L × E CE where— L is the amount of the loss recognised for accounting purposes, E is the amount of expenditure on the asset that is recognised for tax purposes, and CE is the amount capitalised in respect of expenditure on the asset.

4 For the purposes of subsection (3), subject to any adjustments required by this Part or Part 4 of TIOPA 2010 (provision not at arm's length), the amount of expenditure on the asset that is recognised for tax purposes is the same as the amount of expenditure on the asset capitalised by the company.

5 In a subsequent period of account the amount of the debit for tax purposes in respect of the expenditure on an asset is— L × WDV AV where— L is the amount of the loss recognised for accounting purposes, WDV is the tax written-down value of the asset (see section 742) immediately before the amortisation charge is made or, as the case may be, the impairment loss is recognised for accounting purposes, and AV is the value of the asset recognised for accounting purposes immediately before the amortisation charge or, as the case may be, the impairment review.

6 In this section “ capitalised ” means capitalised for accounting purposes.

7 This section does not apply to an asset in respect of which an election is made under section 730.