Corporation Tax Act 2009 section 438

Disapplication of Chapter where transparent entities involved

Section 438 removes the application of the European cross-border merger loan relationship rules where one or more of the merging companies is a transparent entity — that is, a company resident in a member state that does not have an ordinary share capital.

• Where a transparent entity transfers its assets and liabilities to another company as part of a merger, the special loan relationship merger rules in this Chapter do not apply to that transfer at all.
• Where assets and liabilities of other companies are transferred to a transparent entity as part of a merger, the specific rules on reorganisations involving loan relationships (section 435) and fair value accounting by the original holder (section 436) do not apply to any new holding received.
• A "transparent entity" is defined as a company that is resident in a member state and does not have an ordinary share capital — in other words, an entity that is treated as transparent for tax purposes because it has no shares through which ownership is held in the usual way.
• The "new holding" refers to any securities or other interests received by shareholders as a result of the merger reorganisation, as defined for capital gains tax purposes.