Corporation Tax Act 2009 section 627

Meaning of company replacing another as party to derivative contract

Section 627 explains what it means for one company to replace another as a party to a derivative contract, including situations where the replacement happens through means other than a straightforward assignment.

• One company (A) replaces another company (B) as party to a derivative contract when A becomes a party to a contract that confers rights, imposes liabilities, or both, that are equivalent to those B held under a contract B has ceased to be party to
• Replacement can occur not only through direct assignment of rights and liabilities but also through other transactions that achieve the same effect, such as a novation
• The key test is equivalence: if A's new rights and liabilities match those that B previously had, A is treated as having replaced B regardless of the legal mechanism used
• This treatment still applies even if B later becomes a party again to the original contract it had previously left