Section 946 — Corporation Tax Act 2010: Rules for determining “L”

Rules for determining “L” 946 1 This section applies for the purposes of section 945(2) (determination of “L”).

2 A liability is to be ignored if—

a the predecessor was the predecessor in relation to a transfer of a trade on a previous application of this Chapter, and b on that previous application of this Chapter the liability was apportioned under section 952 to a trade carried on by the company that was the successor on that application.

3 Subsection (4) applies if—

a the predecessor transfers a liability to the successor, and b the creditor in question has agreed to accept settlement of part of the liability as settlement for the whole of it.

4 The transfer of the liability is taken to cover only the part of the liability mentioned in subsection (3)(b).

5 The predecessor's capital is to be treated as a liability of the predecessor so far as it is recently converted capital (but not otherwise).

6 For the purposes of subsection (5) a part of the predecessor's capital is recently converted capital if—

a it was issued or otherwise originated on the conversion of a liability that was not part of the predecessor's capital or on the conversion of a part of that capital that was itself recently converted capital, and b the conversion occurred during the period of 12 months ending with the day on which the transfer of the transferred trade occurs.

7 In this section “ the predecessor's capital ” means the predecessor's share capital, share premium account, reserves and relevant loan stock.

8 In subsection (7) “ relevant loan stock ” means any loan stock or similar security (whether secured or unsecured) other than any to which subsection (9) applies.

9 This subsection applies to any stock or security if, when the liability giving rise to the stock or security was incurred, the person who was the creditor was carrying on a trade of lending money.