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 its carrying value in 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)Schedule 28AA to ICTA (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).