Corporation Tax Act 2009 section 435

Reorganisations involving loan relationships

Section 435 provides for continuity of treatment for loan relationships caught up in share reorganisations that occur as part of a European cross-border merger.

• Where a share reorganisation arising from a cross-border merger involves an asset that represents a loan relationship, the loan relationship debits and credits must be calculated as though the asset were disposed of at its notional carrying value
• The notional carrying value is the tax-adjusted carrying value the asset would have had in the original holder's accounts if a period of account had ended immediately before the reorganisation date
• The section applies where the merger transfer rules in sections 433 or 434 apply, or where certain qualifying conditions for the merger chapter are met even if not all conditions are satisfied
• The rules are subject to modification where the original holder uses fair value accounting, and do not apply where transparent entities are involved