Corporation Tax Act 2009

Transferee leaving group after replacing transferor as party to loan relationship

344 Introduction

(1) Sections 345 and 346 apply if—

(a) this Chapter applies in the case mentioned in section 336 (transfers of loans on group transactions),

(b) section 341 (transferor using fair value accounting) does not apply, and

(c) before the end of the relevant 6 year period and while still a party to the relevant loan relationship, the transferee ceases to be a member of the relevant group.

(2) But the transferee is not treated for the purposes of this section and sections 345 and 346 as having left the relevant group if—

(a) an asset or liability which represents a loan relationship is transferred in the course of a transfer or merger in relation to which Chapter 13 (European cross-border transfers of business) or Chapter 14 (European cross-border mergers) applies, and

(b) the transferee ceases to be a member of the relevant group in consequence of the transfer or merger.

(3) In a case where subsection (2) applies, if the transferee becomes a member of another group in consequence of the transfer or merger, it is treated for the purposes of this section and sections 345 and 346 as if the relevant group and the other group were the same.

(4) In this section and sections 345 and 346—

• “the relevant 6 year period” means the period of 6 years following—

  (a)

  in a case where section 340 applies because of a transaction within section 336(2) (“case A”), that transaction, or

  (b)

  in a case where section 340 applies because of a series of transactions within section 336(3) (“case B”), the last transaction of that series,

• “the relevant group” means—

  (a)

  in case A, the group mentioned in section 336(2), and

  (b)

  in case B, the group mentioned in section 336(3), and

• “the relevant loan relationship” means the loan relationship mentioned in section 336(1)(b).

345 Transferee leaving group otherwise than because of exempt distribution

(1) This section applies if—

(a) the transferee ceases to be a member of the relevant group, and

(b) it does not so cease just because of a distribution which is exempt as a result of—

(i) section 213(2) of ICTA (exempt distributions), or

(ii) section 213A of ICTA (exempt distributions: division of business).

(2) If condition A or B is met, this Part applies as if—

(a) the transferee had assigned the asset or liability representing the relevant loan relationship immediately before ceasing to be a member of the relevant group,

(b) the assignment had been for consideration of an amount equal to the fair value of the asset or liability at that time, and

(c) the transferee had immediately reacquired the asset or liability for consideration of the same amount.

(3) Condition A is that if this Part applied as mentioned in subsection (2) because of that subsection applying, a credit would be brought into account for the purposes of this Part by the transferee because of subsection (2)(a) and (b).

(4) Condition B is that—

(a) the relevant loan relationship is a creditor relationship,

(b) the transferee has a hedging relationship between a derivative contract and the creditor relationship, and

(c) because of section 631(2)(a) and (b) (transferee leaving group otherwise than because of exempt distribution) a credit is to be brought into account by the transferee for the purposes of Part 7 (derivative contracts) in respect of the derivative contract.

(5) Section 707 (meaning of “hedging relationship”) applies for the purposes of this section.

346 Transferee leaving group because of exempt distribution

(1) This section applies if—

(a) the transferee ceases to be a member of the relevant group just because of a distribution which is exempt as a result of—

(i) section 213(2) of ICTA (exempt distributions), or

(ii) section 213A of that Act (exempt distributions: division of business), and

(b) there is a chargeable payment within the meaning of section 214(2) of that Act (chargeable payments connected with exempt distributions) within 5 years after the making of that distribution.

(2) If condition A or B is met, this Part applies as if—

(a) the transferee had assigned the asset or liability representing the relevant loan relationship immediately before the chargeable payment was made,

(b) the assignment had been for consideration of an amount equal to the fair value of the asset or liability immediately before the transferee ceased to be a member of the relevant group, and

(c) the transferee had immediately reacquired the asset or liability for consideration of the same amount.

(3) Condition A is that if subsection (2) applied a credit would be brought into account for the purposes of this Part by the transferee because of subsection (2)(a) and (b).

(4) Condition B is that—

(a) the relevant loan relationship is a creditor relationship,

(b) the transferee has a hedging relationship between a derivative contract and the creditor relationship, and

(c) because of section 632(2)(a) and (b) (transferee leaving group because of exempt distribution) a credit is to be brought into account by the transferee for the purposes of Part 7 (derivative contracts) in respect of the derivative contract.

(5) Section 707 (meaning of “hedging relationship”) applies for the purposes of this section.