Corporation Tax Act 2009 section 685

Transferor using fair value accounting

Section 685 provides an alternative rule for European cross-border mergers involving derivative contracts, applying where the transferor company uses fair value accounting instead of the notional carrying value approach under section 684.

• This section overrides the normal notional carrying value rule in section 684 when the transferor uses fair value accounting for the derivative contract
• The transferor brings into account the fair value of the derivative contract as at the date of transfer to the transferee
• The transferee is treated as having acquired the derivative contract for consideration equal to its fair value at the date of transfer
• This deemed consideration applies for all accounting periods in which the transferee holds the contract, determining the credits and debits to be recognised