Corporation Tax Act 2009 section 618

Elections under section 617: groups of companies

Section 618 deals with how a section 617 election (to disapply the fair value accounting restriction in section 616) is treated when companies belong to the same group, ensuring consistent treatment of derivative contracts across the group.

• When a company elects under section 617, any fellow group member that is a counterparty to the same contract is automatically treated as having made the same election, ensuring parity within the group.
• If a contract covered by the election is transferred to another group member, the transferee is treated as having elected too — even if the election is made after the transfer or the companies later leave the group — preventing selective avoidance by pre-transfer of contracts.
• Where a contract subject to the section 616 fair value restriction is transferred within a group from a non-electing company to a company that has elected, the receiving company's election does not apply to that particular contract — it remains ring-fenced under section 616 — unless the original holder subsequently makes its own election.
• Group membership for these purposes is determined by the definition in section 170 of the Taxation of Chargeable Gains Act 1992, which sets out the standard rules for identifying groups of companies.