Finance Act 1996

[F1 19A (1) This paragraph applies where— U.K.

(a) there is a change of accounting policy in drawing up a company’s accounts from one period of account (the “earlier period”) to the next (the “later period”), and

(b) the approach in each of those periods accorded with the law and practice applicable in relation to that period.

(2) This paragraph applies, in particular, where—

(a) the company prepares accounts for the earlier period in accordance with UK generally accepted accounting practice and for the later period in accordance with international accounting standards, or

(b) the company prepares accounts for the earlier period in accordance with international accounting standards and for the later period in accordance with UK generally accepted accounting practice.

(3) If there is a difference between—

(a) the accounting value of an asset or liability representing a loan relationship of the company at the end of the earlier period, and

(b) the accounting value of that asset or liability at the beginning of the later period,

a corresponding debit or credit (as the case may be) shall be brought into account for the purposes of this Chapter in the later period.

(4) In sub-paragraph (3) “accounting value” means [F2 , subject to sub-paragraph (4B),] the carrying value of the asset or liability recognised for accounting purposes.

[F3 (4A) For the purposes of this paragraph the “carrying value” of an asset or liability includes amounts recognised for accounting purposes in relation to the loan relationship in respect of—

(a) accrued amounts;

(b) amounts paid or received in advance;

(c) impairment losses (including provisions for bad or doubtful debts).

(4B) In determining the profits, gains and losses to be recognised in determining the carrying value of the asset or liability for the purposes of this paragraph, the following provisions—

(a) section 87(2) (accounting method where parties have a connection),

(b) section 88A(4) (accounting method where rate of interest is reset),

(c) section 94 (loan relationships: treatment of indexed gilt-edged securities),

(d) section 94A(2) (loan relationships with embedded derivatives),

(e) section 96(2) (special rules for certain gilts),

(f) section 154(6) (FOTRA securities: certain amounts not to be brought into account), and

(g) paragraphs 1, 1A, 2, [F4 4A,] 6, 12 [F5 12B, 12D] and 18 of this Schedule (special computational provisions),

apply as they apply for the purposes of determining the credits and debits to be brought into account under this Chapter.

[F6 (4BA) In determining the accounting value of an asset of the company at the end of the earlier period, no account shall be taken of a debit that in a period of account beginning before 1st January 2005 was disallowed for tax purposes—

(a) because of the assumption required by paragraph 5(1) above, or

(b) because the exceptions in section 74(1)(j) of the Taxes Act 1988 did not apply.]

(4C) Where—

(a) a company has ceased to be a party to a loan relationship,

(b) section 103(6) (credits and debits to be brought into account in respect of profits, gains and losses arising in the cessation period) applied to the cessation, and

(c) there is a difference between—

(i) the amount outstanding in respect of the loan relationship at the end of the earlier period, and

(ii) the amount outstanding in respect of the loan relationship at the beginning of the later period,

a debit or credit (as the case may be) corresponding to that difference shall be brought into account for the purposes of this Chapter at the beginning of the later period.

(4D) In sub-paragraph (4C), “the amount outstanding”, in respect of a loan relationship, means so much of the amount recognised as deferred income or deferred loss in the company's balance sheet, in accordance with generally accepted accounting practice, in respect of the profits, gains or losses that arose from that relationship or a related transaction in the cessation period (within the meaning of section 103(6)) as has not been represented by credits or debits brought into account under this Chapter.]

(5) This paragraph does not apply if or to the extent that such a debit or credit as is mentioned in sub-paragraph (3) [F7 or (4C)] falls to be brought into account apart from this paragraph.

F8 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F1 Sch. 9 paras 19A, 19B and cross-heading inserted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 36

F2 Words in Sch. 9 para. 19A(4) inserted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 4 para. 31(2)

F3 Sch. 9 paras. 19A(4A)-(4D) inserted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 4 para. 31(3)

F4 Word in Sch. 9 para. 19A(4B)(g) inserted (retrospective to 7.4.2005) by Finance (No. 2) Act 2005 (c. 22), Sch. 6 para. 4(2)(6)

F5 Words in Sch. 9 para. 19A(4B)(g) inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), reg. 1(2), Sch. 2 para. 12

F6 Sch. 9 para. 19A(4BA) inserted (with effect in accordance with Sch. 6 para. 6(2) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 6 para. 6(1)

F7 Words in Sch. 9 para. 19A(5) inserted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 4 para. 31(4)

F8 Sch. 9 para. 19A(6) repealed (7.4.2005) by Finance Act 2005 (c. 7), Sch. 4 para. 31(5), Sch. 11 Pt. 2(7)

Modifications etc. (not altering text)

C1 Sch. 9 para. 19A applied (20.7.2005) by Finance (No. 2) Act 2005 (c. 22), Sch. 6 para. 7(6)