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

[F1Profits or losses arising from designated cash flow hedges]U.K.

This section has no associated Explanatory Memorandum

[F29A.—(1) For the purposes of [F3section 598(1)(a) of CTA 2009] there is prescribed all credits and debits representing the whole or part of the fair value profit or loss arising to a company in relation to [F4a currency contract, a commodity contract, a debt contract or an interest rate contract (as the case may be)] in an accounting period if—

(a)the contract or a portion of the contract (“the hedging instrument”) is designated as a hedge in respect of any risks arising in respect of an asset, liability, receipt or expense (“the hedged item”);

(b)fair value profits or losses arising on the hedging instrument are recognised in accordance with generally accepted accounting practice in the company’s statement of recognised gains and losses or statement of changes in equity (“equity statements”); and

[F5(c)regulation 7, 8 or 9, as the case may be, does not apply in respect of contracts of that type.]

This is subject to paragraph (2).

(2) Credits and debits which—

(a)are brought into account in the profit and loss account or income statement (including debits and credits previously brought into account in an equity statement and transferred to the profit and loss account or income statement), or

(b)are taken to the carrying value of an asset or liability [F6where the profit or loss for corporation tax purposes in relation to that asset or liability will not fall to be computed in accordance with generally accepted accounting practice],

are not prescribed for the purposes of [F7section 598(1)(a) of CTA 2009].This is subject to paragraph (3).

(3) In relation to credits or debits within paragraph (2)(a) [F8or (b)], there is prescribed for the purposes of [F9section 598(1)(a) of CTA 2009] any debits or credits corresponding to the paragraph (2)(a) [F8or (b)] debits or credits which are reflected in an equity statement.

[F10(3A) Where a derivative contract becomes a contract in relation to which debits and credits are prescribed by this regulation, or ceases to be such a contract, the amount to be brought into account for the purposes of section 598(1)(b) of CTA 2009 is such amount as is just and reasonable in the circumstances, and with regard to whether as a result of the change any amounts cease to be brought into account or are brought into account more than once.]

(4) In this regulation “an interest rate contract” has the same meaning as in regulation 9.]

Textual Amendments