Corporation Tax Act 2009

Transferee leaving group after replacing transferor as party to derivative contract

630 Introduction to sections 631 and 632

(1) Sections 631 and 632 apply if—

(a) section 625 (group member replacing another as party to derivative contract) applies because of a transaction or series of transactions within section 626(2) or (3), and

(b) before the end of the relevant 6 year period and while still a party to the relevant derivative contract, the transferee ceases to be a member of the relevant group.

(2) But the transferee is not to be treated for the purposes of this section and sections 631 and 632 as having left the relevant group if—

(a) rights and liabilities under a derivative contract are transferred in the course of a transfer or merger in relation to which Chapter 9 (European cross-border transfers of business) or Chapter 10 (European cross-border mergers) applies, and

(b) the transferee ceases to be a member of the relevant group in consequence of the transfer or merger.

(3) In a case where subsection (2) applies, if the transferee becomes a member of another group in consequence of the transfer or merger, it is to be treated for the purposes of this section and sections 631 and 632 as if the relevant group and the other group were the same.

(4) In this section and sections 631 and 632—

• “the relevant 6 year period” means the period of 6 years following—

  (a)

  in a case where section 625 applies because of a transaction within section 626(2) (“case A”), that transaction, or

  (b)

  in a case where section 625 applies because of a series of transactions within section 626(3) (“case B”), the last transaction of that series,

• “the relevant derivative contract” means the derivative contract mentioned in section 625(1),

• “the relevant group” means—

  (a)

  in case A, the group mentioned in section 626(2),

  (b)

  in case B, the group mentioned in section 626(3), and

• “the transferee” has the same meaning as in section 625.

631 Transferee leaving group otherwise than because of exempt distribution

(1) This section applies if—

(a) the transferee ceases to be a member of the relevant group, and

(b) it does not so cease just because of a distribution which is exempt as a result of—

(i) section 213(2) of ICTA (exempt distributions), or

(ii) section 213A of ICTA (exempt distributions: division of business).

(2) If condition A or B is met, this Part applies as if—

(a) the transferee had assigned its rights and liabilities under the relevant derivative contract immediately before so ceasing,

(b) the assignment had been for consideration of an amount equal to their fair value at that time, and

(c) the transferee had immediately reacquired them for consideration of the same amount.

(3) Condition A is that if subsection (2) applied a credit would be brought into account in accordance with this Part by the transferee because of subsection (2)(a) and (b).

(4) Condition B is that—

(a) the transferee has a hedging relationship between the relevant derivative contract and a creditor relationship, and

(b) because of section 345(2)(a) and (b) (transferee leaving group otherwise than because of exempt distribution) a credit is to be brought into account by the transferee for the purposes of Part 5 (loan relationships) in respect of the creditor relationship.

632 Transferee leaving group because of exempt distribution

(1) This section applies if—

(a) the transferee ceases to be a member of the relevant group just because of a distribution which is exempt as a result of—

(i) section 213(2) of ICTA (exempt distributions), or

(ii) section 213A of ICTA (exempt distributions: division of business), and

(b) there is a chargeable payment within the meaning of section 214(2) of that Act (chargeable payments connected with exempt distributions) within 5 years after the making of the distribution.

(2) If condition A or B is met, this Part applies as if—

(a) the transferee had assigned its rights and liabilities under the relevant derivative contract immediately before that chargeable payment was made,

(b) the assignment had been for consideration of an amount equal to their fair value immediately before the transferee ceased to be a member of the relevant group, and

(c) the transferee had immediately reacquired them for consideration of the same amount.

(3) Condition A is that if subsection (2) applied a credit would be brought into account in accordance with this Part by the transferee because of subsection (2)(a) and (b).

(4) Condition B is that—

(a) the transferee has a hedging relationship between the relevant derivative contract and a creditor relationship, and

(b) because of section 346(2)(a) and (b) (transferee leaving group because of exempt distribution) a credit is to be brought into account by the transferee for the purposes of Part 5 (loan relationships) in respect of the creditor relationship.