Part 5Loan Relationships
Chapter 4Continuity of treatment on transfers within groups or on reorganisations
Application of this Chapter
335Introduction to Chapter
(1)
This Chapter applies in the cases mentioned in—
(a)
section 336 (transfers of loans on group transactions),
(b)
section 337 (transfers of loans on insurance business transfers), and
(c)
section 339 (issues of new securities on certain cross-border reorganisations).
(2)
The following sections make provision about how the credits and debits to be brought into account under this Part in those cases are determined—
(a)
sections 340 and 341 (which apply in the cases mentioned in sections 336 and 337), and
(b)
sections 342 and 343 (which apply in the case mentioned in section 339).
(3)
Sections 344 to 346 provide for the treatment of a loan relationship in respect of which section 336 has applied where the company replacing another as a party to a loan relationship later leaves the group of companies of which they were members.
(4)
Section 347 (disapplication of Chapter where transferor party to avoidance involving subsequent transfer by transferee) disapplies this Chapter in some circumstances in the cases mentioned in 336 and 337.
(5)
For the meaning of references in this Chapter to a company replacing another as a party to a loan relationship, see section 338.
(6)
In this Chapter references to a company being a member of a group of companies are to be read in accordance with section 170 of TCGA 1992 (interpretation of sections 171 to 181 of that Act: groups).
336Transfers of loans on group transactions
(1)
The case referred to in section 335(1)(a) is where—
(a)
there is a transaction within subsection (2) or a series of transactions within subsection (3), and
(b)
as a result one of the companies involved (“the transferee”) directly or indirectly replaces the other (“the transferor”) as a party to a loan relationship.
(2)
A transaction is within this subsection if it is a related transaction between two companies which are—
(a)
members of the same group, and
(b)
within the charge to corporation tax in respect of that transaction.
(3)
A series of transactions is within this subsection if it is a series having the same effect as a related transaction between two companies each of which—
(a)
has been a member of the same group at any time in the course of that series, and
(b)
would be within the charge to corporation tax in respect of such a related transaction.
(4)
This Chapter does not apply as a result of this section in relation to—
(a)
a transfer of an asset, or
(b)
a transfer of rights under, or an interest in, an asset,
as a result of a transaction within subsection (2) or a series of transactions within subsection (3) if immediately before or after the transfer the asset F1is held for the purposes of a company's long-term business.
F2(4A)
For the purposes of subsection (4)—
(a)
in the case of an overseas life insurance company, ignore transfers in relation to assets which are not UK assets (within the meaning of section 117 of FA 2012), and
(b)
section 122 of that Act applies as it applies for the purposes of Chapter 8 of Part 2 of that Act.
(5)
In this Chapter, in relation to a case within subsection (1), “the transferee” and “the transferor” have the same meaning as in that subsection.
337Transfers of loans on insurance business transfers
(1)
The case referred to in section 335(1)(b) is where—
(a)
a transfer between two companies occurs to which this section applies, and
(b)
as a result one of the companies (“the transferee”) directly or indirectly replaces the other (“the transferor”) as a party to a loan relationship.
(2)
This section applies to the transfers specified in subsection (3), so far as they are not excluded by subsection (4).
(3)
They are—
(a)
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
(b)
any transfer between two companies which is a qualifying overseas transfer.
F3(3A)
In subsection (3)(b) “qualifying overseas transfer” means so much of a transfer of the whole or any part of the business of an overseas life insurance company carried on through a permanent establishment in the United Kingdom as takes place in accordance with an authorisation granted outside the United Kingdom for the purposes of F4Article 39 of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).
(4)
Subsection (3) does not apply to a transfer of an asset, or of rights under or an interest in an asset, if the asset—
(a)
was within one of F5the applicable categories immediately before the transfer, and
(b)
is not within that category immediately after it.
F6(4A)
For the purposes of subsection (4)(a) “the applicable categories” means—
(a)
in the case of a UK life insurance company, the long-term business categories or a category of assets which are not held for the purposes of its long-term business, and
(b)
in the case of an overseas life insurance company, the UK long-term business categories, a category of UK assets which are not held for the purposes of its long-term business or a category of assets which are held by it but which are not UK assets.
(4B)
For the purposes of subsection (4A)—
(a)
“the long-term business categories” has the same meaning as in section 116 of FA 2012,
(b)
“the UK long-term business categories” and “UK assets” have the same meanings as in section 117 of that Act, and
(c)
section 122 of that Act applies as it applies for the purposes of Chapter 8 of Part 2 of that Act.
(5)
Subsection (6) applies for the purposes of subsection (4) if one of the companies mentioned in subsection (3) is an overseas life insurance company.
(6)
An asset is taken as being in the same category both immediately before and immediately after a transfer if the asset—
(a)
was in one category immediately before the transfer, and
(b)
is within the corresponding category immediately after it.
(7)
In this Chapter, in relation to a case within subsection (1), “the transferee” and “the transferor” have the same meaning as in that subsection.
338Meaning of company replacing another as party to loan relationship
(1)
References in this Chapter to one company (“A”) replacing another company (“B”) as a party to a loan relationship include references to A becoming a party to a loan relationship which—
(a)
confers rights within subsection (2),
(b)
imposes obligations within subsection (2), or
(c)
both confers such rights and imposes such obligations.
(2)
Rights or obligations are within this subsection if they are equivalent to those of B under a loan relationship to which B has previously ceased to be a party.
(3)
For the purposes of subsection (2), A's rights under a creditor relationship are equivalent to rights under another creditor relationship if each set of rights gives the holder of an asset representing the relationship in question—
(a)
the same rights against the same persons as to capital, interest and dividends, and
(b)
the same remedies to enforce those rights.
(4)
For the purposes of subsection (3), any difference in—
(a)
the total nominal amounts of the assets representing each relationship,
(b)
the form in which they are held, or
(c)
the way in which they can be transferred,
is ignored.
(5)
For the purposes of subsection (2), A's obligations under a debtor relationship are equivalent to obligations under another debtor relationship if each set of obligations subjects the holder of the liability representing the relationship in question to—
(a)
the same obligations to the same persons as to capital, interest and dividends, and
(b)
the same remedies to enforce those obligations.
(6)
For the purposes of subsection (5), any difference in—
(a)
the total nominal amounts of the assets representing the creditor relationship corresponding to each relationship,
(b)
the form in which those assets are held, or
(c)
the way in which they can be transferred,
is ignored.
339Issues of new securities on certain cross-border reorganisations
(1)
The case referred to in section 335(1)(c) is where each of conditions A to D is met.
(2)
Condition A is that sections 127 to 130 of TCGA 1992 (reorganisations: equation of original shares and new holding)—
(a)
apply in relation to an exchange as a result of section 135(3) of that Act (which provides for sections 127 to 130 to apply to an exchange of securities for those in another company as if it were a reorganisation), or
(b)
would so apply but for section 116(5) of that Act (which disapplies sections 127 to 130 where the original shares or the new holding consist of or include a qualifying corporate bond).
(3)
Condition B is that the original shares consist of or include an asset representing a loan relationship.
(4)
Condition C is that company A is resident in one member State and company B is resident in another member State.
(5)
For the purposes of this section a company is resident in a member State if—
(a)
it is within a charge to tax under the law of the State as being resident for that purpose, and
(b)
it is not regarded, for the purpose of any double taxation relief arrangements to which the State is a party, as resident in a territory not within a member State.
(6)
Condition D is that neither Chapter 13 (European cross-border transfers of business) nor Chapter 14 (European cross-border mergers) applies in relation to the exchange.
(7)
In this section—
(a)
“company A” and “company B” have the same meaning as in section 135 of TCGA 1992,
(b)
“” has the same meaning as it has for the purposes of sections 126 to 131 of that Act, as applied by section 135 of that Act, and
(c)
“receiving company” means the company to which the issue of shares in or debentures of company B mentioned in section 135(1) of that Act is made.
(8)
If company B is a company to which section 135(5) of TCGA 1992 applies (companies with no share capital), the reference in subsection (7)(c) to the shares in or debentures of company B includes a reference to any interests in the company possessed by its members.