Corporation Tax Act 2009 section 422

Transfer of loan relationship at notional carrying value

Section 422 provides the rule for determining the value at which loan relationships are treated as being transferred when a business is transferred in a European cross-border context.

• When a loan relationship asset or liability is transferred as part of a business transfer, both the transferor and transferee are treated as if the transfer took place at the notional carrying value
• The notional carrying value is the amount that would have appeared as the tax-adjusted carrying value in the transferor's accounts, assuming a period of account ended immediately before the transferor ceased to be a party to the loan relationship
• This deemed consideration figure is used to calculate the credits and debits that both the transferor and transferee must bring into account for corporation tax purposes
• A separate rule applies where the transferor uses fair value accounting, which can override this general treatment