Corporation Tax Act 2009

454 Application of fair value accounting: reset bonds etc U.K.

(1) This section applies if—

(a) a company has a creditor relationship,

(b) the object, or one of the main objects, of the company entering into or becoming a party to the relationship was the securing of a tax advantage, and

(c) conditions A and B are met in relation to an asset representing the relationship.

(2) Condition A is that there is or has at any time been a change in—

(a) the rate of interest payable in the case of the asset,

(b) the amount payable to discharge the debt,

(c) the time at which any payments of interest under the asset fall due, or

(d) the time at which any other payments under the asset fall due.

(3) Condition B is that the difference between—

(a) the fair value of the asset immediately after the change, and

(b) the issue price of the asset,

is equal to at least 5% of the issue price of the asset.

(4) On and after the day on which conditions A and B become met in relation to an asset the credits and debits to be brought into account for the purposes of this Part as respects the loan relationship are to be determined using fair value accounting.

(5) In determining the fair value of an asset for any purpose of this section, it is assumed that all amounts payable by the debtor will be paid in full as they fall due.

(6) For the purposes of subsection (1)(b), it does not matter for whom the advantage is secured.