Corporation Tax Act 2009

695Transfers of value to connected companiesU.K.
This section has no associated Explanatory Notes

(1)This section applies if—

(a)a company (“A”) paid an amount (“amount X”) to a company (“B”) for the grant of an option,

(b)there is a failure to exercise in full all the rights under the option,

(c)until the failure the option was a derivative contract of A,

(d)as a result of the failure there is a transfer of value by A to B,

(e)B is a connected company in relation to A, and

(f)B is not chargeable to corporation tax in accordance with this Part in respect of the derivative contract.

(2)A must bring into account a credit of the appropriate amount in respect of the derivative contract for the accounting period in which the option expired or would have expired if none of the rights under it had been exercised.

(3)If the option expired, “the appropriate amount” means amount X.

(4)If any rights under the option were exercised (in whole or in part), “the appropriate amount” means amount X less so much of it as is referable, on a just and reasonable basis, to the rights which have been so exercised.

(5)In determining for the purposes of subsection (1)(d) whether there is a transfer of value, the assumption in subsection (6) is made.

(6)That assumption is that if there had not been a connection between A and B—

(a)all the rights under the option would have been exercised in full, and

(b)all of those rights would have been exercised on the latest date on which they were exercisable.

(7)In this section “option” is to be construed as if section 580(2) and (3) (meaning of “option”) were omitted.

(8)For the purposes of this section, B is a connected company in relation to A in an accounting period if there is a time in the period when—

(a)A controls B,

(b)B controls A, or

(c)A and B are both controlled by the same person.

(9)But A and B are not taken to be controlled by the same person just because they have been under the control of—

[F1(za)the Crown,]

(a)a Minister of the Crown,

(b)a government department,

(c)a Northern Ireland department,

(d)a foreign sovereign power, or

(e)an international organisation.

(10)Section 472 (meaning of “control”) applies for the purposes of this section.

Textual Amendments

F1S. 695(9)(za) inserted (1.4.2009 retrospective) by Corporation Tax Act 2009 (Amendment) Order 2009 (S.I. 2009/2860), arts. 1(2), 6(6)