24(1)In Schedule 26 to FA 2002 (derivative contracts) after paragraph 30 insert—U.K.
30A(1)This paragraph applies in any case where—
(a)paragraph 28 applies—
(i)by virtue of sub-paragraph (2)(a) of that paragraph (“case A”), or
(ii)by virtue of sub-paragraph (2)(b) of that paragraph (“case B”), but
(b)before the end of the relevant 6 year period, the transferee company ceases to be a member of the relevant group.
(2)In any such case, this Schedule shall have effect as if the transferee company had—
(a)immediately before that cessation, assigned its rights and liabilities under the relevant derivative contract for a consideration of an amount equal to their fair value at that time, and
(b)immediately reacquired them for a consideration of the same amount,
but only if Condition 1 or 2 is satisfied and sub-paragraph (5) does not apply.
(3)Condition 1 is that if sub-paragraph (2) has effect, a credit would in consequence of paragraph (a) of that sub-paragraph fall to be brought into account for the purposes of this Schedule by the transferee company.
(4)Condition 2 is that—
(a)Condition 1 is not satisfied,
(b)the company has a hedging relationship between the relevant derivative contract and a creditor relationship, and
(c)in consequence of paragraph 12A(2)(a) of Schedule 9 to the Finance Act 1996, a credit falls to be brought into account by the transferee company for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 in respect of the creditor relationship.
(5)Where the transferee company ceases to be a member of the relevant group by reason only of an exempt distribution (see sub-paragraph (8))—
(a)sub-paragraph (2) does not have effect, but
(b)if there is chargeable payment within 5 years after the making of the exempt distribution, sub-paragraph (6) applies.
(6)Where this sub-paragraph applies, this Chapter shall have effect as if—
(a)the transferee company had, immediately before the making of the chargeable payment, assigned its rights and liabilities under the relevant derivative contract,
(b)the assignment had been for a consideration of an amount equal to the fair value of those rights and liabilities immediately before the transferee company ceased to be a member of the relevant group, and
(c)the transferee company had immediately reacquired those rights and liabilities for a consideration of the same amount,
but only if Condition 1 or 2, as modified by sub-paragraph (7), is satisfied.
(7)The modifications are that—
(a)in Condition 1, the references to sub-paragraph (2), and paragraph (a) of that sub-paragraph, are to be taken respectively as references to sub-paragraph (6) and paragraphs (a) and (b) of that sub-paragraph, and
(b)in Condition 2, the reference to paragraph 12A(2)(a) of Schedule 9 to the Finance Act 1996 is to be taken as a reference to paragraph 12A(6)(a) and (b) of that Schedule.
(8)In this paragraph—
“assignment”, in relation to Scotland, means an assignation;
“chargeable payment” has the meaning given by section 214(2) of the Taxes Act 1988;
“exempt distribution” means a distribution which is exempt by virtue of section 213(2) of the Taxes Act 1988;
“creditor relationship” has the same meaning as in Chapter 2 of Part 4 of the Finance Act 1996 (see section 103(1) of that Act);
“the relevant 6 year period” means the period of 6 years following—
in case A, the transaction mentioned in paragraph 28(2)(a), or
in case B, the last of the series of transactions mentioned in paragraph 28(2)(b);
“the relevant derivative contract” means the derivative contract mentioned in paragraph 28(1);
“the relevant group” means—
in case A, the group mentioned in paragraph 28(2)(a), or
in case B, the group mentioned in paragraph 28(2)(b);
“the transferee company” means the company referred to as such in paragraph 28(1).”.
(2)The amendment made by this paragraph has effect where a company ceases to be a member of a group on or after 16th March 2005.