OT30133 - Capital Gains

Consideration Other Than Cash. Licence Swaps.

Assuming the licence interests do not both relate to undeveloped areas in the UK or UKCS (when TCGA92\s194 would apply to treat the consideration as nil), they will need to be valued.

If the parties have put a value on the consideration passing between them and it has been honestly reached, then that value will be used on the basis of the judgement in Stanton vDrayton Commercial Investment Co Ltd (55TC286). Where no such values have been placed on the assets, in an arm’s length transaction, and in relation to each party, the disposal proceeds for the asset disposed of are the consideration received, and the cost of the asset acquired is the amount or value of the consideration given wholly and exclusively for the acquisition (TCGA92\s38(1)(a)). In a non arm’s length transaction, and in relation to each party, the disposal proceeds for the asset disposed of are the market value of that asset (Section 17 TCGA), and the cost of the asset acquired is the market value of that asset (TCGA92\s17).

OTO has been asked to confirm in advance of certain swaps made at arm’s length that the licence interests have equal value. This is not necessarily the case and no discussion of valuations should be entered into until after the exchanges are completed. See OT30301 regarding Post Transaction Valuations.