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Finance Act 2019

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41(1)This paragraph applies for an accounting period (“the relevant period”) of a non-UK resident company beginning on or after the commencement date if—

(a)a profit arising in connection with a loan relationship or derivative contract of the company (“the first instrument”) falls by reason of this Schedule to be brought into account in the relevant period in accordance with Part 5 or Part 7 of CTA 2009,

(b)an amount of the profit (“the profit amount”) is referable to a time before the commencement date when the first instrument was not subject to corporation tax,

(c)had the profit arisen at that time it would not have been brought into account in accordance with Part 3 of ITTOIA 2005 in calculating the profits of the UK property business of the company,

(d)at that time the first instrument and another loan relationship or derivative contract (“the second instrument”) were in a hedging relationship with one another, and

(e)an amount of a loss (“the loss amount”) arising in connection with the second instrument would (apart from this paragraph) be prevented by reason of paragraph 40 or section 327 of CTA 2009 from being brought into account in the relevant period accordance with Part 5 or Part 7 of CTA 2009.

(2)So much of the loss amount as does not exceed the profit amount may be brought into account in the relevant period in accordance with Part 5 or Part 7 of CTA 2009.

(3)For the purposes of sub-paragraph (1) the first instrument and the second instrument are in a hedging relationship with one another in so far as one of them is intended to act as a hedge of the company’s exposure to changes in the fair value of the other.

(4)In a case where the first instrument and the second instrument are in a hedging relationship with one another to a limited extent, subsection (2) has effect in relation to so much of the loss amount as is just and reasonable having regard to the extent of that hedging relationship.

(5)For the purposes of this paragraph a profit is referable to a time when the first instrument is not subject to corporation tax so far as, at the time to which the profit is referable, the company would not have been chargeable to corporation tax on any profits arising from the instrument.

(6)If the company was not a party to the first instrument at the time to which the profit is referable, subparagraph (5) applies as if the reference to the company were a reference to the person who at that time was in the same position as respects the instrument as is subsequently held by the company.

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