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

Fair value profits or losses arising from derivative contracts which are currency contracts U.K.

7.— [F1 (1) For the purposes of paragraph 17C(1)(a) of Schedule 26 to the Finance Act 2002 there is prescribed in relation to a derivative contract whose underlying subject matter consists wholly of currency —

(a) all credits and debits representing the whole or part of a company’s fair value profit or loss in an accounting period if—

(i) there is a hedging relationship between the contract or part of the contract and a forecast transaction or a firm commitment (“the hedged item”) of the company; and

(ii) the hedged item is not one [F2 for which fair value profits or losses are brought into account for the purposes of corporation tax];

(b) a company’s paragraph 50A credit or debit in relation to such a contract, if for the accounting period in which the paragraph 50A credit or debit falls to be brought into account sub-paragraph (a) applies to the contract; and

(c) a company’s prior period adjustment credit or debit in relation to such a contract, if for the accounting period in which the prior period adjustment credit or debit falls to be brought into account sub-paragraph (a) applies to the contract,

and the credits and debits mentioned in sub-paragraphs (a) to (c) together make up the regulation 7 fair value profits or losses.]

F3 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Where there is a hedging relationship between part of a currency contract and a hedged item, the part of the [F4 regulation 7] fair value profit or loss that is prescribed is the part which bears to the whole the proportion which the value of that part of the contract which is in the hedging relationship bears to the value of the whole of the contract.

[F5 (4) Paragraph 16(3) of Schedule 26 to the Finance Act 2002 does not apply to any regulation 7 fair value profit or loss.]

Textual Amendments

F1 Reg. 7(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), 8(2)

F2 Words in reg. 7(1)(a)(ii) substituted (29.12.2005 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), 8

F3 Reg. 7(2) 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), 8(3)

F4 Words in reg. 7(3) 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), 8(4)

F5 Reg. 7(4) 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), 8(5)

Commencement Information

I1 Reg. 7 in force at 1.1.2005, see reg. 1(1)