Part 2Calculation of liability in respect of profits

Chapter 4Currency

The currency to be used in tax calculations

9AF1 Designated currency of a UK resident investment company

1

The designated currency of a UK resident investment company is the currency which the company elects as its designated currency.

2

A company (“X”) may elect a currency as its designated currency only if—

a

at the time the election is made condition A or B is met, or

b

the election is made in the period (if any) beginning with the company's incorporation and ending immediately before its first accounting period.

3

But an election made under subsection (2)(b) is void if, at the time X's first accounting period begins, neither condition A nor condition B is met.

4

Condition A is that a significant proportion of X's assets and liabilities are denominated in the currency.

5

Condition B is that—

a

the currency is the functional currency of another company, and

b

it is reasonable to assume that the two companies will meet the consolidation condition.

6

X and another company (“Y”) meet the consolidation condition at any time if—

a

for a period which includes that time, the financial results of X are comprised in financial statements of Y's group prepared in accordance with acceptable accounting practice, or

b

if no financial statements of the group are prepared in accordance with acceptable accounting practice for a period which includes that time, the financial results of X would be comprised in financial statements of Y's group for a period which includes that time if such statements were prepared in accordance with international accounting standards.

7

In subsection (6)—

  • “ financial statements of the group ” means consolidated financial statements of Y and its subsidiaries (within the meaning of section 351 of TIOPA 2010),

  • “ Y's group ” means a group of which Y is the ultimate parent (and for this purpose “ group ” and “ ultimate parent ” have the same meaning as they have for the purposes of Part 7 of that Act (see sections 338 and 339)), and

  • “ acceptable accounting practice ” means—

    1. a

      international accounting standards,

    2. b

      UK generally accepted accounting practice, or

    3. c

      accounting practice which is generally accepted in the country in which Y is resident.

8

A currency is the designated currency of X for a period of account if the election in respect of that currency has effect throughout that period (see section 9B).