C3C1C2Part 7Derivative contracts
Pt. 7 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
Pt. 7 modified by 2007 c. 3, s. 809FZZ(8) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
Chapter 4Further provision about credits and debits to be brought into account
Adjustments on change of accounting F1basis
Word in s. 613 cross-heading substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 74
613Introduction to sections 614 and 615
F61
Sections 614 and 615 (adjustments on change of accounting basis) apply if—
a
a company changes, from one period of account or accounting period to the next, the basis of accounting on which credits and debits relating to its derivative contracts or any of them are calculated for the purposes of this Part,
b
the change of basis—
i
is made in order to comply with a provision made by or under this Part requiring those credits and debits to be determined on a particular basis of accounting, or
ii
results from a change of the company's accounting policy,
c
the change of basis is not made in order to comply with amending legislation not applicable to the previous period,
d
the old basis accorded with the law or practice applicable in relation to the period before the change, and
e
the new basis accords with the law and practice applicable to the period after the change.
2
In this section and those sections—
a
the first of F9the periods mentioned in subsection (1) is referred to as “the earlier period”, and
b
the next is referred to as “the later period”.
F73
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4
If an election is made under section 416, this section and sections 614 and 615 apply as if there were a change of accounting policy consisting of the company treating the assets referred to in section 416(1)(c) as mentioned in section 585(1) as from the date the election has effect.
614F4Change of basis of accounting involving change of value
1
If there is a difference between—
a
the tax-adjusted carrying value of a derivative contract at the end of the earlier period, and
b
the tax-adjusted carrying value of that derivative contract at the beginning of the later period,
a credit or debit (as the case may be) of an amount equal to the difference must be brought into account for the purposes of this Part for the later period in the same way as a credit or debit which is brought into account in determining the company's profit or loss for that period in accordance with generally accepted accounting practice.
2
This section does not apply so far as the credit or debit falls to be brought into account apart from this section.
615Change of accounting policy after ceasing to be party to derivative contract
1
This section applies if—
a
the company has ceased to be a party to a derivative contract in an accounting period (“the cessation period”),
F3b
section 607A (company is not, or has ceased to be, party to derivative contract) applied to the cessation, and
c
there is a difference between the amount outstanding in respect of the derivative contract (see subsection (5))—
i
at the end of the earlier period, and
ii
at the beginning of the later period.
F102
A credit or debit (as the case may be) of an amount equal to the difference must be brought into account for the purposes of this Part for the later period in the same way as a credit or debit which is brought into account in determining the company's profit or loss for that period in accordance with generally accepted accounting practice.
4
F2Subsection (2) does not apply so far as the credit or debit falls to be brought into account apart from this section.
F55
In this section “the amount outstanding in respect of the derivative contract” means—
a
so much of the recognised deferred income or recognised deferred loss from the derivative contract as has not been represented by credits or debits brought into account in accordance with this Part in respect of the contract, and
b
any amounts relating to the matters mentioned in section 594A(1) in respect of the derivative contract that have in accordance with generally accepted accounting practice been recognised in the company's accounts as items of other comprehensive income and not transferred to become items of profit or loss.
6
In subsection (5)—
“recognised deferred income”, in relation to a derivative contract, means the amount recognised in the company's balance sheet in accordance with generally accepted accounting practice as deferred income in respect of the profits which arose from the contract or a related transaction in the cessation period, and
“recognised deferred loss”, in relation to a derivative contract, means the amount so recognised as deferred loss in respect of the losses which so arose.
F87
In determining what amounts fall within subsection (5)(b) at the beginning or end of a period, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous periods.
8
But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous periods which differs from that mentioned in subsection (7), that different assumption applies in determining what amounts fall within subsection (5)(b) at the beginning or end of the period.
Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)