Finance Act 1993

159 Basic valuation

(1) Subject to the following provisions of this section, the basic valuation of an asset or liability is—

(a) such valuation as the company puts on it with regard to the time immediately after the company becomes entitled or subject to it, or

(b) such valuation as the company would put on it with regard to that time under normal accountancy practice, if that valuation is different from that found under paragraph (a) above.

(2) Where (apart from this subsection) the valuation under subsection (1) above would be in a currency (the actual currency) other than the nominal currency, it shall be taken to be the equivalent, expressed in terms of the nominal currency, of the valuation in the actual currency; and the translation required by this subsection shall be made by reference to the London closing exchange rate for the two currencies concerned for the day in which the time mentioned in subsection (1) above falls.

(3) The basic valuation of a liability falling within section 153(2)(c) or (d) above is the consideration for the company becoming subject to the liability; and any consideration or part that is not pecuniary shall be taken to be equal to its open market value—

(a) found at the time when the company becomes subject to the liability, and

(b) if part of the consideration is pecuniary, expressed in the same currency as that part.

(4) Where (apart from this subsection) the valuation under subsection (3) above would be in a currency (the actual currency) other than the nominal currency, it shall be taken to be the equivalent, expressed in terms of the nominal currency, of the valuation in the actual currency; and the translation required by this subsection shall be made by reference to the London closing exchange rate for the two currencies concerned for the day on which the company becomes subject to the liability.

(5) Subsections (6) to (9) below apply where—

(a) the company becomes entitled to a right to settlement under a qualifying debt on a security, and

(b) the circumstances are such that section 713(2)(b) or (3)(b) of the Taxes Act 1988 applies (transferee treated as entitled under accrued income scheme to relief or a sum found in sterling).

(6) In such a case the basic valuation of the right shall be found by taking the consideration for the company becoming entitled to the right and—

(a) subtracting such of the amount found under section 713(2)(b) as is attributable to the right, or

(b) adding such of the amount found under section 713(3)(b) as is attributable to the right;

and any apportionment of consideration or of the amount found under section 713(2)(b) or (3)(b) shall be made on a just and reasonable basis.

(7) The following rules apply for the purposes of subsection (6) above—

(a) any consideration or part that is pecuniary shall be expressed in sterling (if not otherwise so expressed);

(b) any consideration or part that is not pecuniary shall be taken to be equal to its open market value, found at the time when the company becomes entitled to the right and expressed in sterling.

(8) Where the nominal currency of the right mentioned in subsection (5) above is not sterling, the valuation found in sterling under subsection (6) above shall be taken to be its equivalent expressed in terms of the nominal currency.

(9) Any translation required by subsection (7) or (8) above shall be made by reference to the London closing exchange rate for the currencies concerned for the day on which the company becomes entitled to the right.

(10) Subsections (11) and (12) below apply where—

(a) section 127 above applies as regards an asset or liability for an accrual period (the earlier period), and

(b) section 125 or 127 above applies as regards the asset or liability for the next accrual period (the later period).

(11) As regards the later period the basic valuation of the asset or liability shall be taken to be—

(a) the nominal amount of the debt outstanding immediately before the beginning of the later period, or

(b) if section 127(7) above also applies as regards the earlier period, the amount found under section 127(10) for that period.

(12) As regards an accrual period which falls after the later period the basic valuation of the asset or liability shall be the amount found under subsection (11) above, subject to any subsequent application of that subsection.