Commentary

D9.301A Charge on transferor of income stream

Corporate tax
Corporate tax | Commentary

D9.301A Charge on transferor of income stream

Corporate tax | Commentary

D9.301A Charge on transferor of income stream

There is legislation setting out a general principle that, for transfers of income streams after 21 April 2009, a lump sum (the 'relevant amount', see below) received for the sale or transfer is subject to tax in the transferor's hands in the same way that the income itself would have been (so there is no possibility of converting income into capital)1. These provisions only apply where certain conditions are met (D9.301B). Similar provisions also apply for income tax purposes, which essentially mirror the corporation tax rules with a few minor exceptions simply to cater for the different structure of income tax (see E1.468). The rules detailing the disposal of assets and income streams through partnerships are discussed at B7.401, B7.406.

The word 'transfer' is defined very widely for these provisions, to include specific realisation events such as sale, exchange, gift or assignment and also any arrangements that equate in substance to a transfer2. This might include transactions involving options, total return swaps etc. It would not, however, cover transactions that amount in form to a transfer, but, in substance to, for example, the giving of security such as in a repo. The legislation also further explains the use of the phrase 'a transfer taking place' in the case of wider non-sale etc arrangements so that it also includes the making of that arrangement3. A transfer by a partnership of which a company is a member is to be treated as a transfer for these

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