Where recovery of the credit deferred under the rules described in CIRD47040 is triggered by the subsequent realisation of the asset in question and the realisation is only a part realisation then only a proportion of the credit is recovered. Similarly, on a further part realisation, only a proportion of the balance of the deferred credit is recovered. If subsequently the part of the asset retained is itself realised (within the six year period), or the 75% subsidiary relationship is broken, then the so far unrecovered part of the credit is taxed.
Assume that a company ceases to be resident in the UK and elects
for a credit arising under the rule described in
CIRD47030 to be deferred. The amount of
the deferred credit is £1000. There is subsequently a part
realisation of the asset. Its market value at that time is
£1500 and the value of the part retained £1000.
The proportion of the credit to be taxed is that proportion
of the postponed credit that the reduction in the market value of
the asset as a result of the part realisation bears to its market
value beforehand. That is £1000 x [(£1500 - £1000) /
£1500] = £333.
Assume now a second part realisation where the market value
of the asset immediately beforehand is £1000 (i.e. unchanged)
and that of the part retained £200.
The credit to be taxed is £667 x [(£1000 -
£200) / £1000] = £534.
That leaves £133 of the credit [£1000 - (£333
+ £534)] to be taxed on the occurrence of a further event
triggering the recovery of the credit.
