Corporation Tax Act 2009 section 684

Transfer of derivative contract at notional carrying value

Section 684 deals with how derivative contracts transferred during a European cross-border merger are valued for corporation tax purposes.

• When a derivative contract is transferred from a transferor to a transferee during a merger, the transfer is treated as taking place at the contract's notional carrying value
• The notional carrying value is the tax-adjusted carrying value that would have appeared in the transferor's accounts if a period of account had ended immediately before the transfer
• Both the transferor and the transferee use this notional carrying value to calculate any taxable credits and debits arising from the derivative contract
• This rule is overridden by section 685 where the transferor uses fair value accounting for the derivative contract