Corporation Tax Act 2009 section 876

Original asset subject to fixed-rate writing down

Section 876 deals with what happens when a change of accounting policy causes an intangible fixed asset, for which a fixed-rate writing down election has been made, to be split into two or more separate assets.

• When an accounting policy change splits a single intangible fixed asset into two or more assets, and a fixed-rate writing down election under section 730 applies to the original asset, the election carries forward automatically to each of the resulting assets.
• The tax written-down value of the original asset is apportioned among the resulting assets in proportion to their respective accounting values at the start of the later period, using the formula: WDVE × (AVL / TAVL).
• After the split, the cost recognised for tax purposes of each resulting asset is its apportioned tax written-down value plus any subsequent capitalised expenditure on that asset.
• Going forward, the tax written-down value of each resulting asset is calculated by reference only to credits and debits arising after the date of the split.