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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate debt: transfers of income streams: company transferors: meaning of ‘transfer’

Company transferors: meaning of ‘transfer’

The word ‘transfer’ is defined widely at CTA10/S757(3) to include sale, exchange, gift and assignment. It also includes, ‘any other arrangement which equates in substance to a transfer’. This is intended to encompass transactions that have the economic effect of transferring income - such as the creation of a right to benefit from income - without an outright asset transfer.

The use of the phrase ‘a transfer taking place’ in the legislation includes the making of arrangements.

Example 1

T Ltd assigns to an unconnected company, U Ltd, the right to dividends from certain shares it holds as investments. In exchange, U Ltd assigns to T Ltd its freehold interest in a plot of land. This exchange will be a transfer for the purposes of Schedule 25 and the open market value of the interest in the land (that is the amount of the consideration for the transfer of the right - S753(2)(a) will be brought into T Ltd’s accounts as income.