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5.—(1) Where in any accounting period—
(a)a company holds more than one asset in relation to which there are amounts of exchange gains and losses falling within regulations 3 or 4; and
(b)the currency—
(i)in which the assets are denominated and the liability [F1mentioned in regulation 3(1)] expressed; or
(ii)which is the underlying subject matter of the derivative contract [F2mentioned in regulation 4(1)] ,
is the same currency, F3... [F4the extent to which an asset is matched is determined in accordance with the following rules].
Liabilities and contracts are regarded as matched to the greatest possible extent with assets which are ships or aircraft.]
Subject to Rule 1, liabilities and contracts are regarded as matched to the greatest possible extent with assets on the disposal of which a chargeable gain would accrue [F6if the disposal were made on a date falling more than 12 months after the date of acquisition of the asset].
Subject to Rules 1 and 2, liabilities [F7and contracts] are regarded as matched with assets on a disposal of which no chargeable gain would be treated as accruing by virtue of Part 1 of Schedule 7AC to the Taxation of Chargeable Gains Act 1992(1) F8....
(2) If—
(a)part only of a liability falling within the third condition in regulation 3, or
(b)part only of a contract falling within the third condition in regulation 4,
could reasonably be expected to eliminate or substantially reduce the economic risk of holding the asset which is attributable to fluctuations in exchange rates, the liability or contract is to be treated as being matched with a corresponding amount of value of an asset.
(3) For the purposes of paragraph (1), a currency in which a liability is expressed or which is the underlying subject matter of a derivative contract, is to be treated, if it is not the case, as the same currency in which an asset is denominated if—
(a)borrowing in that currency, or
(b)the obligation to deliver that currency,
could reasonably be expected to eliminate or substantially reduce the economic risk of holding the asset, or part of the asset, which is attributable to fluctuations in exchange rates.
(4) Where regulation 3 or [F9section 328(3) of CTA 2009] applies to a company in an accounting period in relation to a liability representing a loan relationship there is prescribed, for the purposes of regulation 3 or [F10section 328(4)] of that Act, an exchange gain or loss treated by virtue of [F11section 192(1) of the Taxation (International and Other Provisions) Act 2010] as arising in that accounting period to another company in relation to the same loan relationship.
Textual Amendments
F1Words in reg. 5(1)(b)(i) 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), 6(2)(a)
F2Words in reg. 5(1)(b)(ii) 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), 6(2)(b)
F3Words in reg. 5(1)(b) 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), 6(2)(c)
F4Words in reg. 5(1) added (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), 6(3)
F5Words in reg. 5(1) substituted (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), 6(4)
F6Words in reg. 5(1) 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), 6(5)
F7Words in reg. 5(1) 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), 6(6)(a)
F8Words in reg. 5(1) revoked (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), 6(6)(b)
F9Words in reg. 5(4) 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(7)(a)
F10Words in reg. 5(4) 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(7)(b)
F11Words in reg. 5(4) 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(7)(c)
Commencement Information
I1Reg. 5 in force at 1.1.2005, see reg. 1(1)
1992 c. 12. Part 1 was inserted by paragraph 1 of Part 1 of Schedule 8 to the Finance Act 2002.