Corporation Tax Act 2009 section 698

Disposals for consideration not fully recognised by accounting practice

Section 698 deals with situations where a company disposes of rights or liabilities under a derivative contract for a consideration that is not fully reflected in its accounts, and the disposal was motivated by tax avoidance.

• Where a company disposes of rights or liabilities under a derivative contract, the full consideration received may not always be recognised in the company's accounts under generally accepted accounting practice.
• If the disposal was made with a tax avoidance motive, the portion of the consideration that is not recognised in the accounts must nevertheless be brought into account for corporation tax purposes.
• This ensures that companies cannot exploit gaps between accounting treatment and actual consideration received in order to reduce their tax liability on derivative contract disposals.
• Where the transfer pricing rules would already impose a tax charge on the same disposal, those rules take priority over this section, preventing a double charge on the same transaction.

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