Corporation Tax Act 2009 section 334

Non-UK resident company ceasing to hold loan relationship for section 333(2) purposes

Section 334 deals with the deemed disposal and reacquisition at fair value of a loan relationship asset or liability when a non-UK resident company's permanent establishment in the UK ceases to hold or owe it, other than through an actual disposal.

• When a non-UK resident company's UK permanent establishment ceases to hold a loan relationship asset or owe a loan relationship liability — other than through an actual transaction — the company is treated as having disposed of it at fair value and immediately reacquired it for the same amount.
• This deemed disposal and reacquisition crystallises any gains or losses for corporation tax purposes at the point the asset or liability leaves the scope of the UK permanent establishment.
• The rule does not apply where the cessation occurs because the company is leaving a group and certain group transfer conditions are met — specifically, where the company had previously replaced another group member as party to the loan relationship and it ceases to hold the asset or liability at the same time as it leaves the group.
• An asset or liability is regarded as ceasing to be held for these purposes only if it stops being connected to any of the qualifying purposes (such as being held by a UK permanent establishment) and does not simply move to being held for another qualifying purpose.