F19A

1

For the purposes of paragraph 17C(1)(a) of Schedule 26 to the Finance Act 2002 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 F2a 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

c

the company has made an election under regulation F36(3A), 6(5) or 6(5B) (as the case may be).

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 F4where 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 paragraph 17C(1)(a) of Schedule 26 to the Finance Act 2002.This is subject to paragraph (3).

3

In relation to credits or debits within paragraph (2)(a) F5or (b), there is prescribed for the purposes of paragraph 17C(1)(a) of Schedule 26 to the Finance Act 2002 any debits or credits corresponding to the paragraph (2)(a) F5or (b) debits or credits which are reflected in an equity statement.

F63A

Where—

a

amounts in respect of a currency contract, a commodity contract or a debt contract are brought into account differently as a result of an election under regulation 6(3A), or

b

an interest rate contract ceases to be a contract to which regulation 9 applies as a result of an election under regulation 6(5B),

the amount to be brought into account for the purposes of paragraph 17C(1)(b) of Schedule 26 to the Finance Act 2002 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, and that amount shall be brought into account on the first day of the first accounting period beginning on or after 1st January 2006.

4

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