Corporation Tax Act 2009 section 346

Transferee leaving group because of exempt distribution

Section 346 deals with what happens when a company that received a loan relationship through a group transfer leaves the group as a result of an exempt distribution (such as a demerger), and a chargeable payment is subsequently made within five years.

• The section applies where a transferee company leaves a group solely because of an exempt distribution, and a chargeable payment connected with that distribution is made within 5 years
• If triggered, the transferee is treated as having assigned the loan relationship asset or liability immediately before the chargeable payment was made
• The deemed assignment is treated as being for consideration equal to the fair value of the asset or liability immediately before the transferee left the group
• The transferee is then treated as having immediately reacquired the asset or liability for the same fair value amount, effectively crystallising any gain or loss at that point