Part IVIncome Tax, Corporation Tax and Capital Gains Tax
Chapter IIInterest Rate and Currency Contracts
Anti-avoidance and related provisions
165Transfers of value by qualifying companies
1
Subsection (2) below applies where, as a result of—
a
a qualifying company entering into a relevant transaction on or after its commencement day, or
b
the expiry on or after a qualifying company’s commencement day of an option held by the company which, until its expiry, was a qualifying contract,
there is a transfer of value by the qualifying company to an associated company or an associated third party.
2
For the accounting period of the qualifying company in which the transaction was entered into or the option expired, there shall be deducted from amount B or, as the case may require, added to amount A an amount equal to the value transferred by that company.
3
For the purposes of subsection (1) above there is a transfer of value by the qualifying company to an associated company or an associated third party if, immediately after the transaction or expiry—
a
the value of the qualifying company’s net assets is less, and
b
the value of the associated company’s or associated third party’s net assets is more,
than it would have been but for the transaction or expiry; and the amount by which the value mentioned in paragraph (a) above is less is the value transferred by the qualifying company for the purposes of subsection (2) above.
4
Any reference in subsection (3) above to the value of a person’s net assets being less or more than it would have been but for the transaction or expiry includes a reference to the value of that person’s net liabilities being more or, as the case may be, less than it would have been but for the transaction or expiry.
5
In applying subsection (3) above, no account shall be taken of any such payment as is mentioned in section 151(2)(a) or (b) above.
6
A third party, that is to say, a person who is not an associated company, is an associated third party for the purposes of this section at the time when the relevant transaction is entered or the option expires if, at that time, each of the two conditions mentioned below is fulfilled.
7
The first condition is that the relevant transaction is entered into or the option is allowed to expire in pursuance of arrangements made with the third party.
8
The second condition is that, in pursuance of those arrangements, a transfer of value has been or will be made to an associated company (directly or indirectly) by the third party or by a company which was at the time when the arrangements were made an associated company of that party.
9
Where it appears to the inspector that there is a transfer of value by the qualifying company to a third party, he may by notice in writing require the company, within such time (which shall not be less than 30 days) as may be specified in the notice, to furnish to the inspector such information—
a
as is in its possession or power, and
b
as the inspector reasonably requires for the purpose of determining whether the third party is an associated third party for the purposes of this section.
10
Subsection (3) above shall (with the necessary modifications) apply for the purposes of subsections (7) to (9) above as it applies for the purposes of subsection (1) above.
11
In this section—
“associated company” shall be construed in accordance with section 416 of the Taxes Act 1988;
“relevant transaction” means a transaction as a result of which—
- a
a qualifying company becomes party to a qualifying contract, or
- b
the terms of a qualifying contract to which a qualifying company is party are varied;
and any reference to an associated company is, unless the contrary intention appears, a reference to an associated company of the qualifying company.
- a