Corporation Tax Act 2009 section 421

Introduction to Chapter

Section 421 sets out the conditions under which the special rules for European cross-border transfers of business apply to loan relationships, and requires all companies involved to make a joint claim.

• The chapter applies where a company resident in one relevant state (the UK or an EU member state) transfers all or part of a UK business to a company in another relevant state, wholly in exchange for shares or debentures, and the transferee is within the charge to corporation tax — both companies must claim.
• An alternative route in applies where a company transfers part of its UK business to one or more companies resident in different relevant states, the transferor continues trading, each transferee is within the corporation tax charge, and the transfer is made by issuing shares or debentures to the transferor's shareholders — unless prevented by company law restrictions on a company acquiring its own shares.
• A further condition enables additional reorganisation rules for loan relationships to apply where a UK resident company transfers part of its business previously carried on through a permanent establishment in a member state, provided the cross-border, continuation-of-business and share-exchange requirements are also satisfied.
• The chapter will not apply where the transfer is carried out for tax avoidance purposes or where transparent entities are involved, and "relevant state" means the United Kingdom or an EU member state.