DESCRIPTION
In the ordinary course of business, Company A creates client records. Company A has also acquired client records as a result of various business acquisitions. The information in these records is of value to Company A in its ongoing business activities. 2. Company A recognises copyright in the client records post acquisition and apportions a significant amount of the consideration attributed in the contract to goodwill and/or other unspecified intangibles to this copyright. Company A then proceeds to claim a capital allowance deduction for the copyright. 3. Company A does not claim a capital allowance deduction for the copyright in the internally created client records. 4. Company A then makes a loan to Company B. In turn, Company B makes a loan of the same amount to Company C. These three companies are all within the same wholly-owned group but have not yet consolidated for income tax purposes. 5. Company C purchases all of the client records and any copyright that may subsist in the records from Company A. The consideration payable by Company C is the same amount as the loan it received from Company B. 6. Company C claims a deduction under the capital allowance provisions based on the entire amount of the consideration paid, purportedly on the basis that that amount is attributable to any copyright that may subsist in the records. 7. Company C uses the low-value pool provisions to accelerate the capital allowance deduction on the basis that each item of copyright is a separate asset.