OT30140 - Capital gains: consideration other than cash: time at which non-licence consideration and value of a licence are determined

For disposals made before 23 March 2011 the definition of non-licence consideration is consideration that does not consist of disposal of a UK licence, as determined at the time the swap arrangements are entered into.

For disposals made before 23 March 2011 a reference to the value of a licence comprised in disposal A or disposal B (see TCGA92\S195A) is a reference to the value of the licence as determined under the swap arrangements at the time the swap arrangements are entered into.

For later disposals, any determination:

  • of the consideration given for disposal A or disposal B,
  • of the non-licence consideration, or
  • of the value of a licence comprised in disposal A or disposal B

is to be made as at the time the swap arrangements are entered into. However if, under the swap arrangements, economic benefits and liabilities under the licences concerned are treated as passing at a time (‘the effective time’) which falls before or after the day on which the arrangements are entered into, then any determination:

  • of the consideration given for disposal A or disposal B,
  • of the non-licence consideration, or
  • of the value of a licence comprised in disposal A or disposal B

is to be made as at the effective time (TCGA92\S196(5E)).

However TCGA92\S196(5F) provides that if the swap arrangements make provision for an increase in the non-licence consideration to reflect the period between the effective time and the time it is payable, the non-licence consideration is to be treated as if it were the amount found by making a corresponding increase in the amount determined under TCGA92\S196(5E).

The reason for these changes (apart from TCGA92\S196(5F)) is that under swap arrangements companies generally reimburse expenditure incurred on or after the effective date. Under the definition of non-licence consideration that existed until FA2011, such reimbursement could fall within the definition of non-licence consideration.