Section 117 | Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets

(1)If tax would have been chargeable under the law of one or more ... member States in respect of the transfer mentioned in section 116(2)(b)(i), (ii) or (iii) but for the Mergers Directive, this Part applies, and any double taxation arrangements apply, as if that tax had been chargeable.^F1

(2)In calculating tax notionally chargeable under subsection (1), it is to be assumed—

(a)that, to the extent permitted by the law of the ... member State, losses arising on the transfer mentioned in section 116(2)(b)(i), (ii) or (iii) are set against gains arising on that transfer, and^F2

(b)that any relief due to the transferor under that law is claimed.

(3)Subsection (1) does not apply if—

(a)the transfer of business mentioned in section 116(2)(a) or (3)(a) is not effected for genuine commercial reasons, or

(b)that transfer of business forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.

(4)But subsection (3) does not prevent subsection (1) from applying if before the transfer—

(a)the appropriate applicant has applied to the Commissioners for Her Majesty's Revenue and Customs, and

(b)the Commissioners have notified the appropriate applicant that they are satisfied subsection (3) will not have that effect.

(5)In subsection (4) “the appropriate applicant” means—

(a)in a case where tax chargeable in respect of such a transfer as is mentioned in section 116(2)(b)(i) or (ii) is concerned, the companies mentioned in section 116(2)(a) or (3)(a), and

(b)in a case where tax chargeable in respect of such a transfer as is mentioned in section 116(2)(b)(iii) is concerned, the transferor.

(6)Sections 427 and 428 of CTA 2009 (procedure and decisions on applications for clearance) have effect in relation to subsection (4) as in relation to section 426(2) of that Act, taking the references in section 428 to section 426(2)(b) as references to subsection (4)(b) of this section.