Corporation Tax Act 2009 section 423

Transferor using fair value accounting

Section 423 provides the rule that applies in place of section 422 (transfer at notional carrying value) where the transferor company uses fair value accounting for the loan relationship being transferred in a European cross-border transfer of business.

• Where the transferor uses fair value accounting for a loan relationship, the transfer is measured at fair value on the date the transferee becomes a party to the relationship, rather than at notional carrying value
• The transferor brings into account the fair value of the asset or liability as at the transfer date — this amount is known as "the transferor's amount"
• The transferee is treated as having acquired the asset or liability for consideration equal to the transferor's amount, and this figure is used to determine credits and debits for subsequent accounting periods
• The fair value accounting rule applies whenever the transferor's loan relationship credits and debits are determined on a fair value basis for corporation tax purposes, even if the transferor does not otherwise use fair value accounting for the relationship