Corporation Tax Act 2010 section 637

Transfer of rights to payment

Section 637 deals with how transferred rights to receive payments from a deposit-taking trade are treated as winding up receipts for corporation tax purposes.

• When a company or its liquidator sells the right to receive a sum from its deposit-taking business to another party, and that sum would have been a winding up receipt if the company had received it directly, special rules apply.
• If the transfer is conducted at arm's length (i.e. on normal commercial terms between independent parties), the consideration received for the transfer is itself treated as a winding up receipt from the deposit-taking trade.
• If the transfer is not at arm's length (e.g. between connected parties or on non-commercial terms), the open market value of the right transferred is treated as a winding up receipt, rather than the actual consideration paid.
• The effect is to ensure that the tax charge on winding up receipts cannot be avoided by transferring the right to receive a payment to someone else instead of collecting it directly.