Corporation Tax Act 2009

350 Companies beginning to be connected

(1) This section applies if—

(a) a company’s loan relationship becomes a connected companies relationship, and

(b) as a result of the application of section 349 the company—

(i) brings into account credits or debits determined in accordance with fair value accounting for one accounting period (“the earlier period”), and

(ii) brings into account credits or debits determined in accordance with an amortised cost basis of accounting for the next accounting period (“the later period”).

(2) If—

(a) the fair value of a relevant asset at the end of the earlier period (“FVA”), exceeds

(b) the cost of the asset which would be given at that time on an amortised cost basis of accounting (“ACA”),

the excess must be brought into account for the later period as a debit for the purposes of this Part.

(3) If ACA exceeds FVA, the excess must be brought into account for the later period as a credit for the purposes of this Part.

(4) If—

(a) the fair value of a relevant liability at the end of the earlier period (“FVL”), exceeds

(b) the cost of the liability which would be given at that time on an amortised cost basis of accounting (“ACL”),

the excess must to be brought into account for the later period as a credit for the purposes of this Part.

(5) If ACL exceeds FVL, the excess must to be brought into account for the later period as a debit for the purposes of this Part.