Corporation Tax Act 2009 section 424

Reorganisations involving loan relationships

Section 424 deals with how loan relationships are treated for corporation tax purposes when a share reorganisation occurs as part of a European cross-border transfer of business.

• Where a share reorganisation takes place as part of a qualifying European cross-border business transfer, and the original shares include an asset representing a loan relationship, special rules apply
• The loan relationship asset is treated as if it were disposed of at its notional carrying value — meaning no taxable gain or loss arises purely from the reorganisation itself
• The notional carrying value is the tax-adjusted carrying value that would have appeared in the original holder's accounts if an accounting period had ended immediately before the reorganisation took place
• These rules are subject to modifications where the original holder uses fair value accounting, and do not apply where transparent entities are involved