Corporation Tax Act 2009 section 444

Transactions not at arm's length: general

Section 444 requires that where a loan relationship transaction is not conducted at arm's length, the taxable credits and debits must be recalculated as if the transaction had been carried out on normal commercial terms between independent parties.

• Where a loan relationship transaction is not at arm's length, credits and debits must be recalculated using the "independent terms assumption" — that is, the terms that knowledgeable and willing parties would have agreed between themselves
• This arm's length adjustment does not apply to debits arising when a company acquires rights under a loan relationship for less than market value — the acquiring company simply uses the actual lower acquisition cost and is taxed on any resulting profit when it later disposes of the asset
• The adjustment also does not apply to certain intra-group transfers where group continuity rules under section 340 apply (or would apply but for the transferor using fair value accounting under section 341), nor does it apply to exchange gains or losses, which are dealt with separately under sections 447 to 452
• Where the international transfer pricing rules in Part 4 of TIOPA 2010 also apply to the same transaction, those rules take priority and section 444 is disapplied under section 445