Corporation Tax Act 2009 section 628

Transferor using fair value accounting

Section 628 provides alternative rules for intra-group transfers of derivative contracts where the transferor uses fair value accounting, replacing the standard group continuity treatment that would otherwise apply under section 625.

• Where the transferor uses fair value accounting for a derivative contract transferred within a group, the standard group continuity rules in section 625 are displaced and fair value rules apply instead.
• The transferor must bring into account the fair value of the derivative contract as at the date of transfer to the transferee, rather than using the usual tax-neutral treatment.
• The transferee is treated as having acquired the derivative contract for consideration equal to its fair value at the transfer date, regardless of the accounting method the transferee itself uses, and this treatment applies for every accounting period in which the transferee holds the contract.
• If a discount arises on the transaction or series of transactions, the amount brought into account by the transferor is increased by the amount of that discount.