Section FO 18 — Income Tax Act 2007: When amalgamating companies are parties to financial arrangement

FO 18 When amalgamating companies are parties to financial arrangement When this section applies (1) This section applies when amalgamating companies are parties to a financial arrangement that exists on the date of the amalgamation of the companies. Financial arrangement discharged (2) The financial arrangement is, for the purposes of section EW 31 (Base price adjustment formula), treated as having been discharged immediately before the amalgamation. The consideration for the discharge is as follows: (a) on a resident's restricted amalgamation,— (i) if the amalgamating company is solvent, the consideration is the accrued balance for the financial arrangement: (ii) if the amalgamating company is insolvent but is likely to be able to meet its obligations under the financial arrangement, the consideration is the accrued balance for the financial arrangement: (iii) if the amalgamating company is insolvent and is unlikely to be able to meet its obligations under the financial arrangement, the consideration is the market value of the financial arrangement on the date of the amalgamation: (b) on an amalgamation other than a resident's restricted amalgamation, the consideration is the market value of the financial arrangement on the date of the amalgamation. When subsection (4) applies (3) Subsection (4) applies when an amalgamating company that is the borrower under the financial arrangement— (a) is solvent; or (b) is insolvent but is likely to be able to meet its obligations under the financial arrangement. No remission (4) The other party to the financial arrangement is not regarded as remitting an amount in excess of the consideration treated as paid for the discharge under subsection (2)(a)(i) or (ii) or (b), as applicable, merely by virtue of the discharge. When subsection (6) applies (5) Subsection (6) applies when an amalgamating company that is the borrower under the financial arrangement is insolvent and is unlikely to meet its financial obligations under the financial arrangement. Market value treated as paid (6) For the purposes of section EW 31 , the financial arrangement is treated as discharged immediately before the amalgamation and the market value of the financial arrangement is treated as being paid by the amalgamating company to the other party to the financial arrangement. Amount remitted (7) For the purposes of subsection (6), the other party to the financial arrangement is treated as having remitted an amount equal to the excess over market value of the outstanding accrued balance for the financial arrangement, see section FO 20 . Defined in this Act: amalgamated company , amalgamating company , amalgamation , amount , company , consideration , financial arrangement , market value , pay , resident’s restricted amalgamation , Compare: 2004 No 35 s FE 10(1)–(5), (6)(c) Section FO 18(2) heading: substituted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(2): substituted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(3) heading: substituted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(3): substituted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(4) heading: substituted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(4): substituted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(5) heading: added (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(5): added (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(6) heading: added (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(6): added (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(7) heading: added (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18(7): added (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 66(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section FO 18 list of defined terms pay : inserted (with effect on 1 April 2008), on 21 December 2010, by section 66(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130).