Transactions within groupsU.K.
28(1)This paragraph applies where, as a result of any transaction or series of transactions falling within sub-paragraph (2), one of the companies there referred to (“the transferee company”) directly or indirectly replaces the other (“the transferor company”) as a party to a derivative contract.
(2)The transactions or series of transactions referred to in sub-paragraph (1) are—
(a)a related transaction between two companies that are—
(i)members of the same group, and
(ii)within the charge to corporation tax in respect of that transaction;
(b)a series of transactions having the same effect as a related transaction between two companies each of which—
(i)has been a member of the same group at any time in the course of that series of transactions, and
(ii)is within the charge to corporation tax in respect of the related transaction;
(c)a transfer between two companies of business consisting of the effecting or carrying out of contracts of long-term insurance which has effect under an insurance business transfer scheme; and
(d)any transfer between two companies which is a qualifying overseas transfer within the meaning [F1given by the definition treated as inserted into section 431(2) of the Taxes Act 1988 by paragraph 6(9) of Schedule 19AC to that Act] (transfer of business of overseas life insurance company).
[F2(3)For the purpose of determining the credits and debits to be brought into account for the purposes of this Schedule in respect of the derivative contract—
(a)for the accounting period in which the transaction or, as the case may be, the first of the series of transactions takes place, the transferor company shall be treated as having entered into that transaction for a consideration equal to the notional carrying value of the contract; and
(b)for any accounting period in which it is a party to the contract, the transferee company shall be treated as if it had acquired the contract for a consideration equal to its notional carrying value.
For the purposes of this sub-paragraph the notional carrying value is the amount that would have been the carrying value of the derivative contract in the accounts of the transferor company if a period of account had ended immediately before the date when the company ceased to be party to the contract.]
[F3(3A)Where the debits or credits to be brought into account for the purposes of this Schedule in respect of any amounts fall to be determined in accordance with sub-paragraph (3), Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length) does not apply in relation to those amounts.]
[F4(4)References in this paragraph to one company replacing another as party to a derivative contract shall include references to a company becoming party to any derivative contract which—
(a)confers rights or imposes liabilities, or
(b)both confers rights and imposes liabilities,
where those rights or liabilities, or rights and liabilities, are equivalent to those of the other company under a derivative contract to which that other company has previously ceased to be party.]
(5)In this paragraph [F5“carrying value” has the same meaning as it has for the purposes of paragraph 50A;] “insurance business transfer scheme” means a scheme falling within section 105 of the Financial Services and Markets Act 2000 (c. 8), including an excluded scheme falling within Case 2, 3 or 4 of subsection (3) of that section.
(6)In this paragraph references to companies being members of the same group of companies shall be construed in accordance with section 170 of the Taxation of Chargeable Gains Act 1992 (c. 12).
(7)This paragraph has effect subject to paragraphs 29 and 30.
Textual Amendments
F1Words in Sch. 26 para. 28(2)(d) substituted (with effect in accordance with reg. 1 of the amending S.I.) by The Overseas Life Insurance Companies Regulations 2004 (S.I. 2004/2200), regs. 1(1), 11(4)
F2Sch. 26 para. 28(3) substituted (with effect in accordance with Sch. 7 para. 22(4)-(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 22(2)
F3Sch. 26 para. 28(3A) inserted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), Sch. 5 para. 15
F4Sch. 26 para. 28(4) substituted (with effect in accordance with s. 179(5) of the amending Act) by Finance Act 2003 (c. 14), s. 179(3)
F5Words in Sch. 26 para. 28(5) inserted (with effect in accordance with Sch. 7 para. 22(5)(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 22(3)
Modifications etc. (not altering text)
C1Sch. 26 para. 28 modified by S.I. 1997/473, reg. 53G (as inserted (30.1.2003) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2003 (S.I. 2003/23), regs. 1(1), 10)