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

[F1 Profits and losses arising from loan relationships with embedded derivatives U.K.

11.— [F2 (1) For the purposes of section 85B(3) of the Finance Act 1996 (amounts recognised in determining company’s profits and loss) the amounts described in paragraph (2) are prescribed in relation to a company which is party to a creditor relationship to which—

(a) either—

(i) section 92 (convertible securities etc: creditor relationships), or

(ii) section 93 (relationships linked to the value of chargeable assets),

of the Finance Act 1996 applied immediately before the start of the first accounting period of the company to begin on or after 1st January 2005, and

(b) section 94A of the Finance Act 1996 (loan relationships with embedded derivatives) applies in the first accounting period of the company to begin on or after 1st January 2005.

(1A) Where paragraph (1) does not apply, for the purposes of section 85B(3) of the Finance Act 1996 the amounts described in paragraph (3) are prescribed in relation to a company which is party to a creditor relationship to which—

(a) section 92, or

(b) section 93,

of the Finance Act 1996 applies immediately before the start of the first accounting period of the company to begin on or after 1st January 2005.]

(2) The prescribed amounts are all credits and debits in respect of the host contract save for—

(a) credits in relation to interest accruing in respect of the creditor relationship without regard to the amounts given by the effective interest method; and

(b) [F3 where paragraph (1)(a)(i) applies,] credits and debits in respect of exchange gains and losses.

(3) The prescribed amounts are all credits and debits save for—

(a) credits in relation to interest, and

(b) [F4 where paragraph (1A)(a) applies,] credits and debits in respect of exchange gains and losses.

[F5 (4) Where there is a change of accounting policy in drawing up a company’s accounts from one period of account to the next affecting the amounts to be brought into account for accounting purposes in respect of the company’s loan relationships, the amounts prescribed in paragraphs (1) to (3) that would otherwise be brought into account for the purposes of Chapter 2 of the Finance Act 1996 shall not be brought into account.]]

Textual Amendments

F1 Regs. 11, 12 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), 11

F2 Reg. 11(1)(1A) substituted for reg. 11(1) (27.12.2006 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 2006 (S.I. 2006/3236), regs. 1(1), 6(2)

F3 Words in reg. 11(2)(b) inserted (27.12.2006 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 2006 (S.I. 2006/3236), regs. 1(1), 6(3)

F4 Words in reg. 11(3)(b) inserted (27.12.2006 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 2006 (S.I. 2006/3236), regs. 1(1), 6(4)

F5 Reg. 11(4) inserted (29.11.2005 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), 12