As first enacted paragraph 111 only applied to amortisation and
write-downs under FA02/SCH29/PARA9, and to realisation gains under
part 4 of Schedule 29. It did not apply to the 4% election
CIRD12905. This was because we did not
wish to overburden the new schedule with avoidance provisions, and
it was not thought that there would be sufficient amounts at stake
to motivate tax avoiders.
But it became apparent that tax avoidance schemes were being
created which aimed to get existing assets into the new regime by
avoidance transactions designed to overcome the protections we had
against related party transactions. These were clearly avoidance
schemes, but, because, after completion, the company would only
elect for a 4% allowance, it was thought by scheme vendors that the
schemes could not be subject to an avoidance challenge under
paragraph 111.
Because of the very large value of existing intangible
assets, we could not afford to wait to see if these schemes worked.
So counter measures were introduced in FA03. These strengthened the
related party definition in FA02/SCH29/PARA95 and the anti
avoidance rule in paragraph 111. The position following these
counter measures for accounting periods starting on or after 20
June 2003 is as described at
CIRD45150 (related parties) and
CIRD48150 (avoidance). But the counter
measures may involve re-examining transactions that have taken
place in accounting periods ending before 20 June 2003, because for
accounting periods commencing on or after 20 June 2003, the new
measures are deemed to have always been in force. See
CIRD48230.
