Corporation Tax Act 2009 section 879N

When the partial restrictions apply: acquisition from individual or firm

Section 879N sets out when a partial restriction on tax deductions applies where a company acquires a relevant intangible asset (such as goodwill) from a related individual or firm that had previously bought the asset from a third party.

• Where a company acquires a relevant asset on or after 1 April 2019 from a related individual or firm, and the transferor previously acquired the asset (or business including it) from a third party, a partial restriction on tax debits may apply
• The restriction is triggered when the ratio of the asset's notional accounting value (what it would have been worth in GAAP-compliant accounts of the transferor just before the transfer) to the company's acquisition expenditure is less than 1 — meaning the company paid more than the asset's accounting value
• This partial restriction does not apply if a full restriction already applies under the rules for pre-April 2019 assets or where no business or qualifying intellectual property assets were acquired
• For goodwill, the transferor must have acquired all or part of the relevant business (including goodwill) from a third party, and the company must acquire the whole of that business; for other assets, the transferor must have acquired the specific asset from a third party and the company must again acquire the whole business