Exceptions to section 625
628Transferor using fair value accounting
(1)This section applies instead of section 625 if, in a case where that section would otherwise apply, the transferor uses fair value accounting as respects the derivative contract.
(2)The amount which is to be brought into account by the transferor in respect of—
(a)the transaction mentioned in that section, or
(b)the series of transactions mentioned in that section taken together,
is the fair value of the derivative contract as at the date of transfer to the transferee.
(3)For any accounting period in which the transferee is a party to the contract, for the purpose of determining the credits and debits to be brought into account in respect of the contract in accordance with this Part, the transferee is treated as if it had acquired the contract for consideration of an amount equal to the fair value of the contract as at the date of transfer to it.
(4)If a discount arises in respect of the transaction or series of transactions, the amount to be brought into account under subsection (2) is increased by the amount of the discount.
(5)In this section—
“discount” has the same meaning as in section 480 (relevant non-lending relationships involving discounts), and
“the transferor” and “the transferee” have the same meaning as in section 625.
629Tax avoidance
(1)Section 625 does not apply if conditions A and B are met.
(2)Condition A is that the transferor is a party to arrangements in accordance with which there is likely to be a transfer of rights or liabilities under the derivative contract by the transferee to another person in circumstances in which section 625 would not apply.
(3)Condition B is that the purpose or one of the main purposes of the arrangements is to secure a tax advantage for the transferor or a person connected with it.
(4)Section 625 does not apply in relation to a disposal if section 698 (disposals for consideration not fully recognised by accounting practice) applies in relation to the disposal.
(5)In this section—
“arrangements” includes any scheme, agreement, understanding, transaction or series of transactions,
“tax advantage” has the meaning given by section 840ZA of ICTA,
“transfer” includes any arrangement which equates in substance to a transfer (including any acquisition or disposal of, or increase or decrease in, a share of the profits or assets of a firm), and
“the transferor” and “the transferee” have the same meaning as in section 625.