Corporation Tax Act 2009 section 625

Group member replacing another as party to derivative contract

Section 625 sets out how taxable credits and debits are calculated when one company in a group replaces another as a party to a derivative contract through an intra-group transaction.

• Both the transferor and transferee are treated as having transacted at the notional carrying value of the derivative contract, based on the transferor's accounts as if a period of account had ended immediately before the transfer
• If a discount arises (where part of the consideration is deferred and the price is increased to reflect that delay), the transferor's deemed consideration is increased by the discount amount, but the transferee's deemed acquisition cost is not
• The transfer pricing rules in Part 4 of TIOPA 2010 are disapplied, so there is no substitution of market value for the notional carrying value used under this section
• This section is subject to overriding provisions where the transferor uses fair value accounting (section 628) or where there is tax avoidance (section 629)