Corporation Tax Act 2009 section 179

Seller controlled by buyer etc.

Section 179 restricts the tax treatment available when know-how is sold between companies or other bodies that are under common control.

• Where the seller and buyer of know-how are connected through control relationships, special restrictions apply to prevent the parties from choosing favourable tax treatment.
• The general rule in section 177 (which treats know-how disposal proceeds as trading income where the trade continues) is switched off for these connected party transactions.
• The parties are also prevented from making an election under section 178 that would allow the payment for know-how to be treated as something other than a capital payment for goodwill.
• A "body of persons" for these purposes includes a firm (such as a partnership), meaning that partnerships are not excluded from these restrictions simply because they are not separate legal entities.