4A.—(1) For the purposes of regulations 3(7) and 4(5), “relevant value” means—
(a)in relation to shares held by the company in another company (“Company A”), where the company elects, the higher of—
(i)the net asset value underlying the shares in Company A, and
(ii)the value shown in the accounts of the company; and
(b)in any other case, the value shown in the accounts of the company.
(2) In paragraph (1)(a)(i) the net asset value underlying the shares in Company A is an amount equal to—
(a)the value of the assets, less
(b)the value of the liabilities
of Company A and any direct or indirect subsidiary of Company A denominated in the relevant currency.
This is subject to paragraph (6).
(3) The value of assets and liabilities referred to in paragraph (2) is the value at the relevant time shown in—
(a)a balance sheet of Company A, or
(b)where Company A has a direct or indirect subsidiary, a notional consolidated balance sheet of Company A prepared in the relevant currency.
(4) For the purposes of paragraph (3) in determining whether an asset or liability would be recognised in the balance sheet or notional consolidated balance sheet and, if so recognised the value that would be accorded to it, regard shall be had to the accounting treatment of the asset or liability—
(a)in any consolidated accounts prepared by the company, or
(b)where the company does not prepare consolidated accounts, in any consolidated accounts prepared by a company that directly or indirectly controls the company.
(5) Nothing in paragraphs (3) or (4) shall prevent an asset or liability, which might be eliminated in the preparation of any consolidated accounts, from being taken into account in paragraph (2).
(6) If the company does not directly hold the entire issued share capital in Company A, the net asset value underlying the shares in Company A shall be reduced by such amount as is just and reasonable having regard to—
(a)the proportion of the issued shares held by the company, and
(b)where there is more than one class of share, the rights attached to the shares held by the company.
(7) An election under paragraph (1)—
(a)is irrevocable,
(b)applies to all the shareholdings held by the company which are matched in accordance with regulation 3(3)(b) or 4(3)(b),
(c)has effect from the beginning of the accounting period in which the election is made,
(d)must be made in writing to Her Majesty’s Revenue and Customs within the time limit specified in paragraph (8), and
(e)must specify the review period.
(8) The time limit for making an election is—
(a)in relation to shares held on and before the start of the first accounting period beginning on or after 1st January 2008, the later of—
(i)31st March 2008, and
(ii)30 days from the start of that accounting period; and
(b)in any other case, within 30 days of shares being matched in accordance with regulation 3(3)(b) or 4(3)(b).
(6) In this regulation—
“relevant currency” means the currency which, as a result of exchange rate fluctuations, gives rise to the economic risk referred to in regulations 3(3) and 4(3);
“control” has the meaning given in section 840 of the Income and Corporation Taxes Act 1988(1).]
Textual Amendments
F1Regs. 4A-4C substituted for reg. 4A (27.12.2007 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 2007 (S.I. 2007/3431), regs. 1(1), 2(5)
1988 c. 1. Schedule 28AA was inserted by Schedule 16 to the Finance Act 1998 (c. 36). Paragraph 6D was inserted by section 35(2) of the 2004 Act.