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Part 7U.K.Derivative contracts

Modifications etc. (not altering text)

C1Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)

C2Pt. 7 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

C3Pt. 7 modified by 2007 c. 3, s. 809FZZ(8) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))

Chapter 9U.K.European cross-border transfers of business

IntroductionU.K.

674Introduction to ChapterU.K.

(1)This Chapter applies if—

(a)condition A or B is met, and

(b)each of the companies mentioned in subsection (2)(a) or (3)(a) makes a claim under this section,

but see section 677 (tax avoidance etc) and section 680 (disapplication of Chapter where transparent entities involved).

(2)Condition A is that—

(a)a company resident in one [F1relevant state] transfers to a company resident in another [F1relevant state] the whole or part of a business carried on in the United Kingdom,

(b)the transfer is wholly in exchange for shares or debentures issued by the transferee to the transferor, and

(c)immediately after the transfer the transferee is within the charge to corporation tax.

(3)Condition B is that—

(a)a company transfers part of its business to one or more companies,

(b)the transferor is resident in one [F2relevant state],

(c)the part of the transferor's business which is transferred is carried on by the transferor in the United Kingdom,

(d)at least one transferee is resident in a [F3relevant state] other than that in which the transferor is resident (and each transferee is resident in a [F3relevant state], but not necessarily the same one),

(e)the transferor continues to carry on a business after the transfer,

(f)immediately after the transfer each transferee is within the charge to corporation tax, and

(g)the transfer—

(i)is made in exchange for the issue of shares in or debentures of each transferee to each person holding shares in or debentures of the transferor, or

(ii)is not so made only because, and only so far as, a transferee is prevented from so issuing such shares or debentures by section 658 of the Companies Act 2006 (c. 46) (general rule against limited company acquiring own shares) or by a corresponding provision of the law of [F4a] member State preventing such an issue.

(4)In this Chapter—

(5)For the meaning of “company” and “resident in a [F6relevant state]”, see section 681.

Textual Amendments

Transfers of derivative contracts at notional carrying valueU.K.

675Transfer of derivative contract at notional carrying valueU.K.

(1)This section applies if in the course of the transfer of business the transferor transfers the rights and liabilities under a derivative contract to a transferee.

(2)For the purpose of determining the credits and debits to be brought into account in respect of the derivative contract in accordance with this Part, the transferor and the transferee are treated as having entered into the transfer of those rights and liabilities for consideration of an amount equal to the notional carrying value of the contract.

(3)For the purposes of this section, the notional carrying value of a contract is the amount which would have been [F7its 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.

(4)This section is subject to section 676 (transferor using fair value accounting).

Textual Amendments

F7Words in s. 675(3) 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. 87

676Transferor using fair value accountingU.K.

(1)This section applies instead of section 675 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 the transfer of the rights and liabilities mentioned in section 675(1) 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 derivative 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.

Exception for tax avoidance cases and clearancesU.K.

677Tax avoidance etcU.K.

(1)This Chapter does not apply in relation to the transfer of business if—

(a)the transfer of business is not effected for genuine commercial reasons, or

(b)the transfer of business forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.

(2)But subsection (1) does not prevent this Chapter from applying if before the transfer of business—

(a)the companies mentioned in section 674(2)(a) or (3)(a) have applied to the Commissioners for Her Majesty's Revenue and Customs, and

(b)the Commissioners have notified them that they are satisfied that subsection will not have that effect.

678Procedure on application for clearanceU.K.

(1)This section applies in relation to an application under section 677(2).

(2)The application must be in writing and must contain particulars of the operations which are to be effected.

(3)The Commissioners for Her Majesty's Revenue and Customs may by notice require the applicant to provide further particulars for the purpose of enabling them to make their decision.

(4)Such a notice may only be given within 30 days of the receipt of the application or of any further particulars previously required under subsection (3).

(5)If such a notice is not complied with within 30 days or such longer period as the Commissioners for Her Majesty's Revenue and Customs may allow, they need not proceed further on the application.

679Decision on application for clearanceU.K.

(1)The Commissioners for Her Majesty's Revenue and Customs must notify their decision on an application under section 677(2) to the applicant—

(a)within 30 days of receiving the application, or

(b)if they give a notice under section 678(3), within 30 days of the notice being complied with.

(2)If the Commissioners for Her Majesty's Revenue and Customs—

(a)notify the applicant that they are not satisfied as mentioned in section 677(2)(b), or

(b)do not notify their decision to the applicant within the time required by subsection (1),

the applicant may within 30 days of the notification or of that time require them to transmit the application to the tribunal, together with any notice given and further particulars provided under section 678(3).

(3)In that case any notification by the tribunal has effect for the purposes of section 677(2)(b) as if it were a notification by the Commissioners for Her Majesty's Revenue and Customs.

(4)If any particulars provided under section 678 do not fully and accurately disclose all facts and considerations material for the decision—

(a)of the Commissioners for Her Majesty's Revenue and Customs, or

(b)of the tribunal,

any resulting notification by the Commissioners for Her Majesty's Revenue and Customs or the tribunal is void.

Transparent entitiesU.K.

680Disapplication of Chapter where transparent entities involvedU.K.

(1)This Chapter does not apply in relation to the transfer of business if the transferor is a transparent entity.

(2)In this section “transparent entity” means a company which is resident in a member State F8... and which does not have an ordinary share capital.

Textual Amendments

InterpretationU.K.

681InterpretationU.K.

(1)In this Chapter “company” means any entity listed as a company in [F9Part A of Annex I] to the Mergers Directive.

(2)For the purposes of this Chapter, a company is resident in a [F10relevant state] if—

(a)it is within a charge to tax under the law of the [F11relevant 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 [F11relevant state] is a party, as resident in a territory not within a [F10relevant state].

Textual Amendments