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EW 46: Consideration when debtor released as condition of new start grant
or “This old rule about tax effects of debt relief from new start grants no longer applies”
You could also call this:

“How to calculate value when switching from fair value method in financial arrangements”

When you’re involved in a financial arrangement and you change from using the fair value method to a different method, there are some things you need to know. This applies when you have to work out a base price adjustment at the end of the first year you use the new method for the financial arrangement.

The law says that you’re treated as if you’ve been paid an amount equal to what the financial arrangement is worth in the market. This happens at the end of the first year you use the new method for the financial arrangement.

If you need to look up more information about the base price adjustment, you can check section EW 29(13).

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Next up: EW 46C: Consideration when debt remitted within economic group

or “Rules for handling cancelled debts between related businesses”
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Part E Timing and quantifying rules
Financial arrangements rules: Consideration treated as paid by person

EW 46BConsideration when party changes from fair value method

  1. This section applies when a party to a financial arrangement—

  2. changes from the fair value method to another method; and
    1. is required under section EW 29(13) to calculate a base price adjustment at the end of the first income year for which the replacement method is used for the financial arrangement.

      1. The person is treated as having been paid an amount equal to the market value of the financial arrangement at the end of the first income year for which the replacement method is used for the financial arrangement.

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      Notes
      • Section EW 46B: inserted, on , by section 380 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EW 46B(1)(b): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 35(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
      • Section EW 46B(2): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 35(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).