Corporation Tax Act 2009

Miscellaneous

606 Exchange gains and losses

(1) The reference in section 595(3) to the profits and losses arising to a company from its derivative contracts includes a reference to exchange gains and losses so arising.

(2) Subsection (1) is subject to subsections (3) and (4).

(3) Subsection (1) does not apply to an exchange gain or loss of a company so far as—

(a) it arises—

(i) in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency, or

(ii) as a result of the translation from one currency to another of the profit or loss of part of the company’s business, and

(b) it is recognised in the company’s statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings.

(4) Subsection (1) does not apply to 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 is within a description specified for the purpose in regulations made by the Treasury.

(5) The Treasury may by regulations make provision for or in connection with bringing into account in specified circumstances amounts to which subsection (1) does not apply because of subsection (3) or (4).

(6) The reference in subsection (5) to bringing amounts into account is a reference to bringing amounts into account—

(a) for the purposes of this Part as credits or debits arising to a company from its derivative contracts, or

(b) for the purposes of corporation tax on chargeable gains.

(7) The regulations may—

(a) make different provision for different cases, and

(b) make provision subject to an election or to other specified conditions.

(8) For the meaning of references to exchange gains or losses from derivative contracts, see section 705.

607 Pre-contract or abortive expenses

(1) This section applies if—

(a) a company may enter into a derivative contract or related transaction but has not yet done so,

(b) it incurs any expenses for purposes connected—

(i) with entering into it, or

(ii) with giving effect to any obligation which might arise under it, and

(c) had the company entered into the contract or transaction, the expenses would be expenses within section 595(3)(b).

(2) The expenses are treated as expenses in relation to which debits may be brought into account in accordance with section 595(3) to the same extent as if the company had entered into the contract or transaction.

608 Company ceasing to be party to derivative contract

(1) This section applies if—

(a) a company ceases to be a party to a derivative contract in an accounting period (the “cessation period”),

(b) profits or losses arise to the company from the derivative contract or a related transaction in that period, and

(c) the credits or debits brought into account in accordance with this Part for that period do not include credits or debits representing the whole of those profits or losses.

(2) Credits or debits in respect of so much of those profits or losses as are not represented by credits or debits brought into account for the cessation period must continue to be brought into account in accordance with this Part over one or more subsequent accounting periods (“post-cessation periods”) as in the case of a derivative contract to which the company is a party in those periods.

(3) Subsection (4) applies if any question arises how far in a post-cessation period—

(a) the company is a party to the derivative contract for the purposes of a trade it carries on, or

(b) the derivative contract is referable to a particular business the company carries on or a particular description of such business.

(4) The question is to be determined by reference to the circumstances immediately before the company ceased to be a party to the derivative contract, instead of the circumstances in the post-cessation period.

(5) Subsection (6) applies if any question arises—

(a) how far the derivative contract has a particular purpose in a post-cessation period, or

(b) whether there is a connection between the company and any other person for a post-cessation period.

(6) The question is to be determined by reference to the circumstances in the cessation period, instead of the circumstances in the post-cessation period.

(7) For the purposes of the Corporation Tax Acts, references to a person’s derivative contracts and to a person being a party to a derivative contract are to be read in accordance with this section.

609 Company ceasing to be UK resident

(1) If a company ceases to be UK resident, this Part applies as if—

(a) immediately before so ceasing the company had assigned the rights and liabilities under its derivative contracts for consideration of an amount equal to their fair value at that time, and

(b) it had immediately reacquired them for consideration of the same amount.

(2) Subsection (1) does not apply in relation to a derivative contract so far as immediately after the company ceases to be UK resident its rights and liabilities under the contract are held or owed for the purposes of a permanent establishment of the company in the United Kingdom.

(3) Subsection (1) does not apply if—

(a) the conditions in section 630(1)(a) and (b) are met in relation to the company (transferee leaving group after replacing transferor as party to derivative contract), and

(b) it ceases to be UK resident at the same time as it ceases to be a member of the relevant group.

(4) In subsection (3) “the relevant group” has the meaning given by section 630(4).

610 Non-UK resident company ceasing to hold derivative contract for UK permanent establishment

(1) This section applies if the rights and liabilities under a derivative contract of a company which is not UK resident cease to any extent to be held or owed for the purposes of a permanent establishment of the company in the United Kingdom in circumstances not involving a related transaction.

(2) This Part applies as if—

(a) immediately before the rights and liabilities so cease the company had assigned them, so far as so ceasing, for consideration of an amount equal to their fair value at that time, and

(b) the company had immediately reacquired them for consideration of the same amount.

(3) This section does not apply if—

(a) the conditions in section 630(1)(a) and (b) are met in relation to the company (transferee leaving group after replacing transferor as party to derivative contract), and

(b) the rights and liabilities mentioned in subsection (1) cease to be held or owed for the purposes of the permanent establishment at the same time as the company ceases to be a member of the relevant group.

(4) In subsection (3) “the relevant group” has the meaning given by section 630(4).

611 Release under statutory insolvency arrangement of liability under derivative contract

No credit is required to be brought into account by a company in respect of the release of the company’s liability to pay an amount under a derivative contract of the company if the release is part of a statutory insolvency arrangement.