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FM 18: Financial arrangements: transfer from company A to company B
or “Rules for transferring financial arrangements between companies in the same group”
You could also call this:

“Rules for transferring financial arrangements within a company group for fair value”

When a company transfers a financial arrangement to another company in the same consolidated group, there are special rules for how this is treated. These rules apply when the companies are in the same group when the transfer happens, when another specific rule doesn’t apply, and when the way of calculating income and expenses from the arrangement doesn’t change after the transfer.

If these conditions are met, the company giving the financial arrangement is treated as if it received a fair and reasonable amount for it. This amount is based on how much income they would have earned, or how much they would have spent, in the year of transfer if they hadn’t transferred it.

This rule overrides two other rules. One of those rules is about what happens when something is given away for free or for less than it’s worth. The other rule is about deals that try to get around the rules about financial arrangements.

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Next up: FM 20: Financial arrangements: transfer at market value

or “Rules for transferring financial arrangements between companies in the same group at market value”
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Part F Recharacterisation of certain transactions
Consolidated groups of companies: Accounting for particular property

FM 19Financial arrangements: transfer for fair and reasonable consideration

  1. This section applies in an income year in which a company (company A) transfers a financial arrangement to another company (company B) when—

  2. company A and company B are in the same consolidated group at the time of the transfer; and
    1. section FM 18 does not apply to the transfer; and
      1. the method of calculating income and expenditure from the financial arrangement does not change after the transfer, and the consolidated group’s return is made on this basis.

        1. In calculating the base price adjustment, company A’s consideration for the transfer is a fair and reasonable amount of the income that would have been derived, or the expenditure that would have been incurred, by company A in the year of transfer if the transfer had not taken place.

        2. This section overrides sections EW 38 (Consideration when disposal for no, or inadequate, consideration) and GB 21 (Dealing that defeats intention of financial arrangements rules).

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