Taxation (International and Other Provisions) Act 2010 section 121

Tax treated as chargeable in respect of relevant transactions

Section 121 provides that where a cross-border transfer of assets or liabilities would have given rise to a tax charge in another member state but for the Mergers Directive, the tax is nonetheless treated as if it had been chargeable for double taxation relief purposes.

• For the purposes of Part 2 (double taxation relief) and any double taxation arrangements, the foreign tax that would have been chargeable — but for the Mergers Directive exemption — is treated as if it had actually been chargeable.
• When calculating this notional tax charge, it must be assumed that any losses arising on the relevant transfer are set against the profits from that transfer, to the extent permitted by the law of the other state concerned.
• It must also be assumed that any other relief available under that state's law has been claimed, so that the notional tax charge reflects the minimum realistic amount.
• The transfers covered are those involving loan relationship assets or liabilities, derivative contract rights and liabilities, or intangible fixed assets, as described in section 120(5).