[F1Profits and losses arising from loan relationships with embedded derivativesU.K.

11.[F2(1) For the purposes of [F3section 310(1) of CTA 2009] (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 [F4section 310(1) of CTA 2009] 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)[F5where 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)[F6where paragraph (1A)(a) applies,] credits and debits in respect of exchange gains and losses.

[F7(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 [F8Part 5 of the Corporation Tax 2009] shall not be brought into account.]]

Textual Amendments