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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Other tax rules on corporate debt: transfers of income streams: company transferors: relevant amount: treatment

Company transferors: relevant amount: treatment

CTA10/S753(1) brings the relevant amount into account in the same way and to the same extent as that in which the income or other receipts would have been chargeable had there been no transfer of the rights to them.

The significance of the phrase ‘to the same extent’ is that the legislation limits the charge to corporation tax on the transfer of relevant receipts in a case where the receipts would have not been wholly taxed as income although they are wholly of an income nature.

The taxable amount may therefore be less than the relevant amount.

For example, if the relevant receipts arise from anything which would produce credits or debits in relation to the company under CTA09/Part 5 (loan relationships), Part 7 (derivative contracts) or Part 8 (intangible fixed assets) and those debits or credits would have been disregarded under those parts, then a transfer of the right to those amounts will be disregarded to the same extent that the receipts themselves would have been.

Lease rentals payable to a company under a long funding lease within the meaning of CAA01/PT2/CH6A although income, are not wholly taxed as income but are taken into account as elements in determining the taxable finance return. The reference to ‘the same extent’ ensures that if the right to such a rental payment were sold only the part of the consideration that represents the amount that would have been taxed as income is to be charged. So a sale of the right to the finance margin would be taxable, but the sale of the ‘principal’ would not be.