EW 39 Consideration affected by unfavourable factors
When this section applies

(1)

This section applies when—

(a)

a person is a party to a financial arrangement; and

(b)

the person has an accrued entitlement under the arrangement; and

(c)

the person disposes of the arrangement; and

(d)

the consideration for the disposal is affected by any of the following factors:

(i)

a decline in the other party’s creditworthiness between the date on which the arrangement was entered into and the date of the disposal; or

(ii)

an increase, between the date on which the arrangement was entered into and the date of the disposal, in the possibility that the other party will not meet an obligation under the arrangement; or

(iii)

the occurrence of an event reducing or cancelling the other party’s obligations under the arrangement.

Exclusion

(2)

This section does not apply when—

(a)

the person’s business includes holding or dealing in financial arrangements of the class disposed of; and

(b)

the parties to the arrangement disposed of are not associated persons.

Consideration is market value

(3)

The person is treated as having been paid the market value that the accrued entitlement had on the date of the disposal, as if the consideration had not been affected by a factor described in subsection (1)(d).

Consideration is market value: self remission

(4)

The amount of self-remission for the financial arrangement is subtracted from the market value, under subsection (3), of the accrued entitlement on the date of the disposal.

Defined in this Act: accrued entitlement, associated person, business, consideration, financial arrangement, pay, self-remission

Compare: 2004 No 35 s EW 40

Section EW 39(4) heading: inserted (with effect on 1 April 2011 and applying for income years beginning on or after that date), on 30 March 2017, by section 74(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section EW 39(4): inserted (with effect on 1 April 2011 and applying for income years beginning on or after that date), on 30 March 2017, by section 74(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section EW 39 list of defined terms self-remission: inserted (with effect on 1 April 2011), on 30 March 2017, by section 74(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).