Taxation (International and Other Provisions) Act 2010 section 120

Introduction to section 121

Section 120 sets out the circumstances involving transparent entities in European cross-border transfers and mergers that trigger the application of section 121, which deals with tax treated as chargeable in respect of those transactions.

• Section 121 is activated when a cross-border transfer or merger involving a transparent entity (a company resident in a member State without ordinary share capital) would have given rise to a tax charge under a member State's law but for the EU Mergers Directive.
• The relevant transactions cover three categories of assets: loan relationships, derivative contracts, and intangible fixed assets, each of which may arise through either a qualifying cross-border transfer of business or a qualifying cross-border merger.
• A "relevant profit" is the profit (actual or notional) that accrues to the transparent entity in respect of the loan relationship, derivative contract, or intangible fixed asset as a result of the transfer or merger.
• A "transparent entity" is defined as a company resident in a member State that does not have an ordinary share capital, reflecting entities that are looked through for tax purposes.