Corporation Tax Act 2009 section 849AD

Grants involving other taxes

Section 849AD restricts when the market value adjustment rule in section 849AB applies to the grant of a licence or other right between related parties, specifically to prevent it from overriding certain other tax provisions dealing with distributions and employment income.

• Where a company grants a licence or right to a related party at below market value, or receives one from a related party at above market value, the normal market value substitution rule may be switched off for certain other tax purposes
• This switch-off applies where the related party is either not a company, or is a company for which the asset is not a chargeable intangible asset
• It only takes effect where the grant gives rise to an amount relevant to another person's tax calculation under the distribution rules or the employment income rules
• The practical result is that the actual transaction values, rather than substituted market values, are used when calculating distributions under CTA 2010 and employment benefits under ITEPA 2003