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Finance Act 2002

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This is the original version (as it was originally enacted).

Exchange gains and losses arising from derivative contracts

16(1)The reference in paragraph 15(1)(a) to the profits and losses arising to a company from its derivative contracts and related transactions includes a reference to exchange gains and losses arising to the company from its derivative contracts.

(2)Sub-paragraph (1) is subject to the following provisions of this paragraph.

(3)Sub-paragraph (1) does not have effect in relation to—

(a)so much of an exchange gain or loss arising to a company, in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency, as falls within sub-paragraph (4),

(b)so much of any exchange gain or loss arising to a company as results from any translation from one currency to another pursuant to section 93A(4) of the Finance Act 1993 (c. 34) of the profit or loss of part of the company’s business and falls within sub-paragraph (6), or

(c)so much of an exchange gain or loss arising to a company, in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency, as falls within a description prescribed for the purpose in regulations made by the Treasury.

(4)For the purposes of sub-paragraph (3)(a), an exchange gain or loss falls within this sub-paragraph to the extent that in accordance with generally accepted accounting practice an amount representing the whole or part of it—

(a)is carried to or sustained by a reserve maintained by the company; and

(b)is set off by or against an amount falling within sub-paragraph (5).

(5)An amount falls within this sub-paragraph if—

(a)it represents the whole or part of an exchange gain or loss arising to the company in relation to any asset of the company; and

(b)in accordance with generally accepted accounting practice it is carried to or sustained by the reserve mentioned in sub-paragraph (4).

(6)For the purposes of sub-paragraph (3)(b), an exchange gain or loss falls within this sub-paragraph to the extent that, in accordance with generally accepted accounting practice, an amount representing the whole or part of it is carried to or sustained by a reserve maintained by the company.

(7)Where, by virtue of sub-paragraph (3), sub-paragraph (1) does not have effect in relation to an amount representing the whole or part of an exchange gain or loss, paragraph 15(3) shall not have effect in relation to that amount (but this sub-paragraph is subject to regulations under sub-paragraph (8)).

(8)The Treasury may by regulations make provision for or in connection with bringing into account in prescribed circumstances amounts in relation to which sub-paragraph (1) does not, by virtue of sub-paragraph (3), have effect.

(9)The reference in sub-paragraph (8) to bringing amounts into account is a reference to bringing amounts into account—

(a)for the purposes of this Schedule, as credits or debits arising to a company from its derivative contracts and related transactions; or

(b)for the purposes of the Taxation of Chargeable Gains Act 1992 (c. 12).

(10)Any power to make regulations under this paragraph includes power to make different provision for different cases.

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