The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004

Changes to legislation:

There are currently no known outstanding effects for the The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004, Section 10.

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Bringing fair value profits or losses into account on currency and commodity contractsU.K.

This adran has no associated Memorandwm Esboniadol

10.—(1) For the purposes of [F1section 598(1)(c) of CTA 2009] —

(a)there is prescribed the aggregate of the credits and debits representing any [F2regulation 7 or 8] fair value profits or losses excluded in relation to a derivative contract of a company F3...; and

(b)the amount of that aggregate is brought into account for the period in which a termination event occurs.

This is subject to paragraphs (3), (5), (7) [F4and (9)].

(2) In paragraph (1) a “termination event” occurs—

(a)on the company ceasing to be a party to the contract; or

(b)if earlier, when the hedged item begins to affect the company’s profit or loss.

(3) If the forecast transaction or firm commitment which is the hedged item mentioned in regulation 7 or regulation 8 is a forecast transaction of, or a firm commitment to a purchase of, anything the expenditure in relation to which—

(a)falls to be taken into account in computing the profits of a trade or property business carried on by the company, or

(b)would fall to be deducted but for any provision of the Corporation Tax Acts prohibiting the deduction of capital expenditure in respect of depreciation of an asset,

then the aggregate mentioned in paragraph (1)(a) in relation to the contract is[F5, subject to paragraph (3A),] to be brought into account in the accounting period in which the expenditure falls or would fall to be deducted.

[F6(3A) [F7Subject to paragraph (3B),] if paragraph (3)(b) applies—

(a)the amount to be brought into account in an accounting period is the product of

where—

DA is the amount of depreciation recognised in the profit and loss account or income statement in relation to the hedged item in the accounting period,
E is the total expenditure on the hedged item, and
FVP is the aggregate amount of regulation 7 or 8 fair value profit;

(b)where the hedged item is disposed of, the balance of the aggregate amount mentioned in paragraph (1)(a) which has not been brought into account under sub-paragraph (a) of this paragraph shall be brought into account in the accounting period in which the disposal takes place.]

[F8(3B) Where the disposal mentioned in paragraph (3A)(b) is to a company (“the transferee”) which is a member of the same group of companies, in applying paragraph (3A)(a) to the transferee FVP shall be treated as meaning the fair value profits and losses of the transferor.

(3C) In paragraph (3B), “group of companies” has the meaning given in [F9section 624(3) of CTA 2009].]

(4) In paragraph (3) “property business” has the meaning given in [F10section 748(4) of CTA 2009].

(5) Where—

(a)part of a contract to which this regulation applies terminates without the company ceasing to be a party to the contract, or

(b)part only of the hedged item begins to be recognised in determining the company’s profit and loss,

paragraph (1)(b) [F11or paragraph (3)] is to apply to a proportionate amount of the aggregate.

(6) In paragraph (5) “proportionate amount” means that proportion of the relevant aggregate amount which is—

(a)in a case where it is part of the contract which matures, the [F12proportion] which the fair value of the part of the contract maturing bears to the fair value of the whole of the contract at that time, and

(b)in any other case the proportion which the fair value of the hedged item [F13which begins] to be recognised bears to the fair value of the whole of the hedged item at that time.

(7) Where immediately on ceasing to be a party to the contract (“the old contract”), the company enters into another contract (“the new contract”) which meets the conditions in regulation 7 or regulation 8 in relation to the same hedged item as was the hedged item in relation to the old contract—

(a)paragraph (1)(b) shall not apply in relation to the old contract, and

(b)the aggregate prescribed in paragraph (1)(a) in relation to the old contract shall be treated for the purposes of the application of this regulation to the new contract as included in the aggregate prescribed in relation to the new contract.

F14(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F15(9) Where regulation 6B applies—

(a)paragraph (1)(b) does not apply to the transferor, and

(b)the aggregate prescribed in paragraph (1)(a) in relation to the contract held by the transferor is treated as included in the aggregate prescribed in relation to the contract held by the transferee.

In this paragraph “the transferor” and “the transferee” have the same meaning as in section 625 of CTA 2009.]

F16(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F17(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1Words in reg. 10(1) substituted (31.12.2014) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2014 (S.I. 2014/3188), regs. 1(1), 8(13)

F2Words in reg. 10(1)(a) inserted (11.8.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2005 (S.I. 2005/2012), regs. 1(1), 10(2)(a)

F3Words in reg. 10(1)(a) omitted (11.8.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2005 (S.I. 2005/2012), regs. 1(1), 10(2)(b)

F4Words in reg. 10(1) substituted (31.12.2015 with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2015 (S.I. 2015/1961), regs. 1(1), 10(a)

F5Words in reg. 10(3) inserted (11.8.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2005 (S.I. 2005/2012), regs. 1(1), 10(3)

F6Reg. 10(3A) inserted (11.8.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2005 (S.I. 2005/2012), regs. 1(1), 10(4)

F7Words in reg. 10(3A) inserted (29.12.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment No. 2) Regulations 2005 (S.I. 2005/3374), regs. 1(1), 11(2)

F8Reg. 10(3B)(3C) inserted (29.12.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment No. 2) Regulations 2005 (S.I. 2005/3374), regs. 1(1), 11(3)