Group member replacing another as party to derivative contractU.K.
625Group member replacing another as party to derivative contractU.K.
(1)This section applies if—
(a)there is a transaction within section 626(2) or a series of transactions within section 626(3),
(b)as a result one of the companies involved (“the transferee”) directly or indirectly replaces the other (“the transferor”) as a party to a derivative contract.
(2)The credits and debits to be brought into account in accordance with this Part in respect of the derivative contract are determined in accordance with subsections (3) to (5).
(3)For the accounting period in which the transaction or, as the case may be, the first of the transactions takes place, the transferor is treated as having entered into that transaction for consideration of an amount equal to the notional carrying value of the contract (see subsection (6)).
(4)For any accounting period in which the transferee is a party to the contract, it is treated as if it had acquired the contract for consideration of an amount equal to its notional carrying value.
(5)If a discount arises in respect of the transaction or series of transactions, the consideration is increased for the purposes of subsection (3) (but not subsection (4)) by the amount of the discount.
(6)For the purposes of this section—
(a)“discount” has same meaning as in section 480 (relevant non-lending relationships involving discounts), and
(b)the notional carrying value of a contract is the amount which would have been [F1its tax-adjusted carrying value based on] the accounts of the transferor if a period of account had ended immediately before the date when the transferor ceased to be a party to the contract.
(7)[F2Part 4 of TIOPA 2010] (provision not at arm's length) does not apply in relation to the amounts in respect of which credits or debits are to be brought into account under this section.
(8)This section is subject to sections 628 (transferor using fair value accounting) and 629 (tax avoidance).
Textual Amendments
F1Words in s. 625(6)(b) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 79
F2Words in s. 625(7) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 141 (with Sch. 9 paras. 1-9, 22)
Modifications etc. (not altering text)
C1S. 625 excluded by S.I. 2004/3256, reg. 6B(2)(a) (as substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2015 (S.I. 2015/1961), regs. 1(1), 6)
C2S. 625 applied by S.I. 2004/3256, reg. 6C(2)(a) (as substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2015 (S.I. 2015/1961), regs. 1(1), 6)
626Transactions to which section 625 appliesU.K.
(1)This section applies for the purposes of section 625(1)(a).
(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 of transactions 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 of transactions, and
(b)would be within the charge to corporation tax in respect of such a related transaction.
627Meaning of company replacing another as party to derivative contractU.K.
(1)References in this Chapter to one company (“A”) replacing another company (“B”) as a party to a derivative contract include references to A becoming a party to a derivative contract which—
(a)confers rights within subsection (2),
(b)imposes liabilities within subsection (2), or
(c)both confers such rights and imposes such liabilities.
(2)Rights or liabilities are within this subsection if they are equivalent to those of B under a derivative contract to which B has previously ceased to be a party.