LAM16040 - IFRS 17 Transitional Provisions: Transfers of business and cessation: SI2022/1165/Regulations 7-9
Transfers of business
Where a business (or part of a business) is transferred after being within the IFRS 17 tax spreading provisions and before the expiry of the 10-year transitional period, there are rules to deal with the remaining receipts or expenses in respect of the IFRS 17 tax transitional amount depending upon whether the transferee is within the charge to corporation tax or not.
Transferee within charge to corporation tax
Where the transferee is within the charge to UK corporation tax the following rules apply depending upon the accounting standard adopted.
Transfers from an IFRS 17 to UK GAAP reporter, or transfers between two IFRS 17 reporters
Where the transferor is reporting under IFRS 17 and the transferee is reporting the acquired business under UK GAAP, or where the transfer of business takes place between IFRS 17 reporters, the transferee will stand in the shoes of the transferor as far as any remaining IFRS 17 tax transitional amount is concerned. In other words, the IFRS 17 tax transitional amount will transfer with the transferring business and will continue to be spread over the remainder of the 10-year transitional period.
Where only part of the business is transferred, the above rule applies only to that proportion of the transitional amount which is attributable to the transferred business.
Transfers from a UK GAAP to IFRS 17 reporter
Where the transferor is reporting under UK GAAP and the transferee is reporting under IFRS 17 there are no additional tax rules. No IFRS 17 transitional adjustments will arise in either company’s accounts, therefore there will be no IFRS 17 tax transitional amount for tax purposes. Both entities will reflect the profit they earn from the business in their profit and loss accounts and be taxed accordingly.
Transferee not within charge to corporation tax
Where the whole of the company’s long-term business is transferred to an entity not within the charge to UK corporation tax, the full remaining IFRS 17 tax transitional amount is treated as arising to the transferor in the accounting period in which the transfer takes place.
Where only part of the business is transferred, any remaining IFRS 17 tax transitional amount attributable to the transferred part is treated as arising to the transferor in the accounting period in which the transfer takes place. The amount which is referable to the retained business continues to be spread over the remaining transitional period as before.
Cessation
Where a company ceases to carry on BLAGAB or non-BLAGAB long-term business, any remaining IFRS 17 tax transitional amount is treated as arising to the company in the accounting period in which the company ceases to be within the charge to corporation tax in relation to that business.