Corporation Tax Act 2009 section 632

Transferee leaving group because of exempt distribution

Section 632 deals with the tax consequences for derivative contracts when a company leaves a group as a result of an exempt distribution, and a chargeable payment connected with that distribution is subsequently made within five years.

• Where a transferee company leaves a group solely because of an exempt distribution, and a chargeable payment is made within five years of that distribution, special rules apply to its derivative contracts
• The transferee is treated as having assigned its rights and liabilities under the relevant derivative contract immediately before the chargeable payment was made
• The deemed assignment is treated as being for consideration equal to the fair value of those rights and liabilities immediately before the transferee left the group
• The transferee is then treated as having immediately reacquired those same rights and liabilities for the same fair value amount