Corporation Tax Act 2009

Transfers of loan relationships at notional carrying value

433 Transfer of loan relationship at notional carrying value

(1) This section applies if in the course of the merger a transferor transfers an asset or liability representing a loan relationship to the transferee.

(2) For the purpose of determining the credits and debits to be brought into account in respect of the loan relationship in accordance with this Part, the transferor and the transferee are treated as having entered into the transfer of that asset or liability for consideration of an amount equal to the notional carrying value of the asset or liability.

(3) For the purposes of this section—

(a) “carrying value” has the same meaning as it has for the purposes of section 316 (see section 317), and

(b) “notional carrying value”, in relation to an asset or liability, means 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 loan relationship.

(4) This section is subject to section 434.

434 Transferor using fair value accounting

(1) This section applies instead of section 433 if, in a case where that section would otherwise apply, the transferor is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship (see subsection (4)).

(2) The amount which is to be brought into account by the transferor in respect of the transfer of the asset or liability mentioned in section 433(1) (“the transferor’s amount”) is—

(a) if an asset is to be brought into account, its fair value as at the date when the transferee becomes a party to the loan relationship, or the fair value of the rights under or interest in it as at that date, and

(b) if a liability is to be brought into account, its fair value as at that date.

(3) For any accounting period in which the transferee is a party to the loan relationship, for the purpose of determining the credits and debits to be brought into account in respect of it for the purposes of this Part, the transferee is treated as if it had acquired the asset or liability representing the relationship for consideration of an amount equal to the transferor’s amount.

(4) The transferor is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship only if the credits and debits to be brought into account for the purposes of this Part as respects the relationship are determined on that basis.

(5) It does not matter for the purposes of subsection (4) if the transferor does not otherwise use fair value accounting in respect of the loan relationship.

435 Reorganisations involving loan relationships

(1) This section applies if—

(a) sections 127 to 130 of TCGA 1992 (reorganisations: equation of original shares and new holding)—

(i) apply in relation to a reorganisation, or

(ii) would so apply but for section 116(5) of that Act (which disapplies those sections where the original shares or the new holding consists of or includes a qualifying corporate bond),

(b) the original shares consist of or include an asset representing a loan relationship, and

(c) section 433 or 434 applies in relation to a transfer in the course of the merger in which the reorganisation occurs or, in a case where those sections would apply apart from condition D in section 431 not being met, condition G in that section is met in relation to such a transfer.

(2) For the purposes of this Part such debits and credits are to be brought into account as would be brought into account if the reorganisation were a disposal of the asset representing the loan relationship for consideration of an amount equal to its notional carrying value.

(3) For the purposes of this section, the notional carrying value of that asset is the amount which would have been its carrying value in the accounts of the original holder if a period of account had ended immediately before the date when the reorganisation occurred.

(4) In this section—

• “carrying value” has the same meaning as it has for the purposes of section 316 (see section 317),

• “original holder” means a person holding the original shares immediately before the reorganisation,

• “original shares” has the meaning given by section 126(1) of TCGA 1992 (application of sections 126 to 131 of that Act), and

• “reorganisation” includes anything to which sections 127 to 130 of that Act apply as if it were a reorganisation.

(5) This section is subject to—

(a) section 436 (original holder using fair value accounting), and

(b) section 438 (disapplication of Chapter where transparent entities involved).

436 Original holder using fair value accounting

(1) This section applies instead of section 435 if, in a case where that section would otherwise apply, the original holder is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship constituting or included in the original shares.

(2) The amount which is to be brought into account by the original holder in respect of the reorganisation (“the disposal amount”) is the fair value of the asset representing the loan relationship as at the date when the reorganisation occurred, or of the rights under or interest in that relationship as at that date.

(3) For any accounting period in which a successor creditor company is a party to the loan relationship, for the purpose of determining the credits and debits to be brought into account in respect of the relationship for the purposes of this Part, the successor creditor company is treated as if it had acquired the asset representing the loan relationship for consideration of an amount equal to the disposal amount.

(4) Subsections (4) and (5) of section 434 apply for the purposes of this section as they apply for the purposes of that section, but taking the references in that section to the transferor as references to the original holder.

(5) In this section—

• “successor creditor company” means a company in relation to which the loan relationship constituting or included in the original shares is a creditor relationship immediately after the reorganisation, and

• “original holder” and “original shares” have the same meaning as in section 435.

(6) This section is subject to section 438 (disapplication of Chapter where transparent entities involved).