Other general definitionsU.K.
[F1702“Tax-adjusted carrying value”U.K.
(1)This section applies for the purposes of this Part.
(2)“Tax-adjusted carrying value”, in relation to a contract, means the carrying value of the contract recognised for accounting purposes, except as provided by subsection (7).
(3)For the purposes of this section the “carrying value” of the contract includes amounts recognised for accounting purposes in relation to the contract in respect of—
(a)accrued amounts,
(b)amounts paid or received in advance, or
(c)impairment losses (including provisions for bad or doubtful debts).
(4)In determining the tax-adjusted carrying value of a contract in a period of account of a company, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous periods of account.
(5)But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous periods of account which differs from that mentioned in subsection (4), that different assumption applies in determining the tax-adjusted carrying value of the contract in the period.
(6)In determining the tax-adjusted carrying value of a contract at a time other than the end (or beginning) of a period of account of a company, it is to be assumed that a period of account of the company had ended at the time in question.
(7)In determining the profits and losses to be recognised in determining the tax-adjusted carrying value of the contract, the provisions specified in subsection (8) apply as they apply for the purposes of determining the credits and debits to be brought into account in accordance with this Part.
(8)Those provisions are—
(a)section 584 (hybrid derivatives with embedded derivatives),
(b)section 585 (loan relationships with embedded derivatives),
(c)section 586 (other contracts with embedded derivatives),
(d)section 597 (amounts recognised in determining profit or loss),
(e)sections 599A and 599B (amounts not fully recognised for accounting purposes),
(f)section 604A (amounts recognised in other comprehensive income and not transferred to profit and loss),
(g)Chapter 5 (transactions within groups),
(h)Chapter 9 (European cross-border transfers of business), and
(i)Chapter 10 (European cross-border mergers).
(9)In this section “impairment loss” means a debit in respect of the impairment of a financial asset and “impairment” includes uncollectability.]
Textual Amendments
F1S. 702 substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 95
Modifications etc. (not altering text)
C1S. 702 modified by S.I. 2004/3256, reg. 6B(1)(b) (as inserted (with effect in accordance with reg. 1(2)(a)(3) of the amending S.I.) by The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2014 (S.I. 2014/3188), regs. 1(1), 6 (with reg. 9))
703“Chargeable asset”U.K.
(1)For the purposes of this Part, an asset is a chargeable asset if any gain accruing on its disposal would be a chargeable gain for corporation tax purposes.
(2)For the purposes of this section, “asset” includes any obligations under futures contracts which are regarded because of section 143 of TCGA 1992 as assets to the disposal of which that Act applies.
704“Creditor relationship” and “debtor relationship”U.K.
(1)In this Part “creditor relationship” has the same meaning as in Part 5 (loan relationships) (see section 302(5) (meaning of “creditor relationship”)).
(2)In this Part “debtor relationship” has the same meaning as in Part 5 (see section 302(6) (meaning of “debtor relationship”)).
705Expressions relating to exchange gains and lossesU.K.
(1)References in this Part to exchange gains or exchange losses, in relation to a company, are references respectively to—
(a)profits or gains which arise as a result of comparing at different times the expression in one currency of the whole or some part of the valuation put by the company in another currency on an asset or liability of the company, or
(b)losses which so arise.
(2)If the result of such a comparison is that neither an exchange gain nor an exchange loss arises, for the purposes of this Part an exchange gain of nil is taken to arise in the case of that comparison.
(3)The Treasury may make provision by regulations as to the way in which exchange gains or losses are to be calculated for the purposes of this section F2... .
(4)The regulations may be made so as to apply to periods of account beginning before the regulations are made, but not earlier than the beginning of the calendar year in which they are made.
(5)Any reference in this Part to an exchange gain or loss from a derivative contract of a company is a reference to an exchange gain or loss arising to a company in relation to a derivative contract of the company.
Textual Amendments
F2Words in s. 705(3) omitted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 96
706“Excluded body”U.K.
In this Part “excluded body” means—
an authorised unit trust,
an investment trust,
an open-ended investment company, or
a venture capital trust.
707“Hedging relationship”U.K.
(1)This section applies for the purposes of this Part.
(2)A company has a “hedging relationship” between a relevant contract (“the hedging instrument”) and an asset or liability (“the hedged item”) so far as condition A or B is met.
(3)Condition A is that the hedging instrument and the hedged item are designated as a hedge by the company.
(4)Condition B is that—
(a)the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of the hedged item which is attributable to a particular risk and could affect the profit or loss of the company, and
(b)the hedged item is an asset or liability recognised for accountancy purposes or is an identified portion of such an asset or liability.
(5)For the purposes of subsections (2) and (4), the liabilities of a company include its own share capital.
708“Plain vanilla contract”U.K.
In this Part “plain vanilla contract” means a relevant contract other than one to which a company is treated as being a party under—
(a)section 584 (hybrid derivatives with embedded derivatives),
(b)section 585 (loan relationships with embedded derivatives), or
(c)section 586 (other contracts with embedded derivatives).
709“Securities house”U.K.
In this Part “securities house” means a person—
(a)who is authorised for the purposes of FISMA 2000, and
(b)whose business consists wholly or mainly of dealing as a principal in financial instruments within the meaning of section 984 of ITA 2007.
710Other definitionsU.K.
In this Part—
[F3“accounting policy”, in relation to a company, means the principles, bases, conventions, rules and practices that the company applies in preparing and presenting its financial statements,]
“bank” means—
“capital redemption policy” means a contract made in the course of capital redemption business (as defined in [F5section 56(3) of FA 2012]),
“contract of insurance” has the meaning given by [F6section 64 of FA 2012],
“contract of long-term insurance” has the meaning given by [F7section 64 of FA 2012],
“depositary receipt”, in relation to shares (as defined in this section), has the same meaning as it has in Part 4 of FA 1986 in relation to shares (within the meaning of that Part),
“designated” has the meaning it has for accounting purposes,
“equity instrument” has the meaning it has for accounting purposes,
“fair value”, in relation to a derivative contract of a company, means the amount which, at the time as at which the value is to be determined, is the amount which the company would obtain from or, as the case may be, would have to pay to an independent person dealing at arm's length for—
(a)the transfer of the company's rights under the contract, and
(b)the release of all the company's liabilities under it,
[F8“fair value accounting” means a basis of accounting under which—
(a)assets and liabilities are measured in the company's balance sheet at their fair value, and
(b)changes in the fair value of assets and liabilities are recognised as items of profit or loss,]
“financial trader” means—
(a)a person who—
(i)is within section 31(1)(a), (b) or (c) of FISMA 2000, and
(ii)has permission under that Act to carry on one or more of the activities specified in Article 14 and, in so far as it applies to that Article, Article 64 of the Financial Services and Markets Act (Regulated Activities) Order 2001 (S.I. 2001/544), or
(b)a person not within paragraph (a) who is approved by the Commissioners for Her Majesty's Revenue and Customs for the purposes of this section,
“income statement” has the meaning it has for accounting purposes,
“intangible fixed asset” has the same meaning as in Part 8 (intangible fixed assets), and sections 804 to 807 and 809 (assets wholly excluded from that Part) (and sections 800 to 802 so far as they relate to those sections) apply for the purposes of this Part as they apply for the purposes of that Part,
“open-ended investment company” has the meaning given by [F4section 613 of CTA 2010],
“profit-sharing arrangements”, in relation to a firm, has the meaning given by section 1262(4) (allocation of firm's profits or losses between partners),
“”, in relation to a company, means any shares in the company under which an entitlement to receive distributions may arise, including—
(a)a depositary receipt for shares under which such an entitlement may arise, and
(b)in the case of a company which has no share capital, any interests in the company possessed by members of the company,
“statement of changes in equity” has the meaning it has for accounting purposes,
F9...
“statement of income and retained earnings” has the meaning it has for accounting purposes,
“statement of recognised income and expense” has the meaning it has for accounting purposes,
“statement of total recognised gains and losses” has the meaning it has for accounting purposes, and
“warrant” means an instrument which entitles the holder to subscribe for—
(a)shares in a company, or
(b)assets representing a loan relationship of a company,
whether or not the shares or assets exist or are identifiable.
Textual Amendments
F3Words in s. 710 inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 97(a)
F4Words in s. 710 substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 643 (with Sch. 2)
F5Words in s. 710 substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 172(a)
F6Words in s. 710 substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 172(b)
F7Words in s. 710 substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 172(c)
F8Words in s. 710 substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 97(b)
F9Words in s. 710 omitted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 97(c)
Modifications etc. (not altering text)
C2S. 710 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Investment Transactions (Tax) Regulations 2014 (S.I. 2014/685), regs. 1(1), 3(4)