Taxation (International and Other Provisions) Act 2010 section 117

Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets

Section 117 ensures that, for double taxation relief purposes, foreign tax that would have been charged on the transfer of loan relationships, derivative contracts or intangible fixed assets — but was not charged because of the EU Mergers Directive — is still treated as if it had been charged.

• Where tax in a member state would have arisen on such a transfer but for the Mergers Directive, double taxation relief provisions apply as though that tax had actually been charged.
• When calculating this notional foreign tax, it is assumed that available losses are set against gains on the transfer and that all available reliefs are claimed by the transferor.
• The notional tax treatment does not apply if the underlying business transfer lacks genuine commercial reasons or forms part of a tax avoidance scheme.
• The tax avoidance restriction can be overridden if the relevant parties apply to HMRC in advance and receive clearance that the anti-avoidance rule will not apply.