What is a transparent entity under Corporation Tax Act 2009 section 429?

Under section 429, a transparent entity is a company that is resident in a relevant state but does not have ordinary share capital. Such entities typically allow profits and losses to flow through to their members rather than being taxed at the entity level, making standard cross-border transfer provisions inappropriate for them.

What happens when the transferor in a European cross-border transfer is a transparent entity?

If the transferor is a transparent entity, the entire Chapter on European cross-border transfers of business is disapplied. None of the provisions in the Chapter apply to that transfer at all, regardless of the nature of the transferees, because the framework is considered wholly inappropriate for transparent transferors.

How does section 429 apply when only a transferee is a transparent entity?

When the transferor is not a transparent entity but one or more transferees are, the disapplication is only partial. Specifically, the reorganisation provisions in sections 424 and 425 do not apply to those transparent transferees, but the remaining provisions of the Chapter may still apply to the transfer.

Where is the meaning of 'resident in a relevant state' defined for section 429 purposes?

The meaning of 'resident in a relevant state' is set out separately in section 430 of the Corporation Tax Act 2009. This definition is essential for determining whether a company qualifies as a transparent entity under section 429, as the company must be resident in such a state and lack ordinary share capital.

Corporation Tax Act 2009 section 429

Disapplication of Chapter where transparent entities involved

Section 429 explains when the rules on European cross-border transfers of business involving loan relationships are switched off because a transparent entity is involved in the transaction.

If the transferor in a cross-border business transfer is a transparent entity, the entire Chapter on European cross-border transfers of business does not apply to that transfer.
If any transferee is a transparent entity, the specific provisions on reorganisations involving loan relationships (sections 424 and 425) do not apply, even though the rest of the Chapter may still be relevant.
A transparent entity is defined as a company that is resident in a relevant state but does not have an ordinary share capital.
The meaning of "resident in a relevant state" is set out separately in section 430.

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