Revenue Note for Guidance

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Revenue Note for Guidance

769O Transitional measures

Summary

The tracking and tracing rules in section 769L do not apply to expenses incurred prior to 1 January 2016. Therefore, in order to calculate the formula for section 769I in relation to qualifying assets developed or bought before that date, transitional measures are required.

Details

(1) The following rules apply when determining the costs relating to an accounting period that begins on or after 1 January 2016 and on or before 31 December 2019:

  • (a) acquisition costs in relation to a qualifying asset includes any acquisition costs ever incurred in relation to the asset.
  • (b) group outsourcing costs includes any group outsourcing costs ever incurred, and if those costs were incurred prior to 1 January 2016 and related to more than one qualifying asset, those costs can be apportioned on a just and reasonable basis.
  • (c) qualifying expenditure on the qualifying asset is calculated with reference to the 4 year period ending on the last day of the accounting period. Any amounts incurred after 1 January 2016 must be tracked and traced, and any amounts incurred before that date can be an apportionment of the total qualifying expenditure on qualifying assets.

(2) The following rules apply when determining the costs relating to an accounting period that begins on or after 1 January 2020 –

  • acquisition costs, in relation to a qualifying asset, includes any acquisition costs ever incurred in relation to the asset.
  • group outsourcing costs includes any group outsourcing costs ever incurred, and if those costs were incurred prior to 1 January 2016 and related to more than one qualifying asset, those costs can be apportioned on a just and reasonable basis.
  • qualifying expenditure on the qualifying asset does not include any amount incurred prior to 1 January 2016.

(3) A company must have records available to show that they have complied with the requirements of this section.

(4) A company that can track and trace the pre 1 January 2016 expenditure with the same level of precision and certainty that is required of post 1 January 2016 expenditure may use those actual expenses rather than the transitional arrangements outlined in this section.

Relevant Date: Finance Act 2021