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HMRC internal manual

Corporate Finance Manual

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Derivative contracts: hedging: regulation 6B: transfers within groups

This guidance applies to periods of account starting on or after 1 January 2015. 

Regulation 6B: transfers within groups

Legislation

If a derivative contract is transferred within a group, its treatment will depend upon whether regulation 7, 8 or 9 previously applied to that contract. If a company transfers a derivative contract which it has elected for the Disregard Regulations to apply to, and CTA09/S625 would apply but for CTA09/S628, then:

  1. S625 will apply instead of S628
  2. Regulation 7, 8 or 9 (as appropriate) will determine the carrying value of the contract for the purposes of CTA09/S702
  3. Regulation 7, 8 or 9 (as appropriate) will apply in respect of that contract in relation to the transferee
  4. If a derivative contract is transferred, to which no regulation 6A election has been made, then any election made by the transferee under regulation 6A has no effect in relation to that contract
  5. In each case it must be remembered that the application of group continuity and regulations 7, 8 and 9 are principally about timing.

In each case it must be remembered that the application of group continuity and regulations 7, 8 and 9 are principally about timing.

Transferor has made an election into regulation 7, 8 or 9

The election will apply for determining the carrying value of the contract. This election also applies for the purpose of determining the debits and credits to be brought into account under CTA09/PART7. The election will continue to apply in respect of that contract in relation to the transferee.

Because the Disregard Regulations apply, the transferor company will for tax purposes be using an accruals basis, rather than a fair value basis, to account for the contract. Regulation 6B therefore ensures that the transfer is governed by CTA09/S625, which deals with intra-group transfers where the transferor company uses an amortised cost basis, rather than S628, which deals with the fair value case.

There is an example at CFM57390.

Transferor had not made an election

Where the transferor had not made an election into the Disregard Regulations in respect of the particular contract then any election made by the transferee has no effect in relation to that contract.