Corporation Tax Act 2009 section 436

Original holder using fair value accounting

Section 436 provides special rules for reorganisations involving loan relationships where the original holder of the shares uses fair value accounting, overriding the general reorganisation rules that would otherwise apply.

• Where the original holder uses fair value accounting for the loan relationship within the original shares, the disposal amount is the fair value of the asset or rights at the date of the reorganisation
• The successor creditor company (the company holding the creditor relationship after the reorganisation) is treated as having acquired the loan relationship asset for consideration equal to that disposal amount
• The same fair value accounting principles that apply to transferors in cross-border mergers also apply here, but with references to the transferor read as references to the original holder
• These rules are disapplied where transparent entities are involved in the arrangements