CFM77120 | 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 S757 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.