|
| |
|
(b) | the sum of the relevant exchange gains of those companies |
| |
that arise in such accounting periods. |
| |
| |
(a) | the sum of the relevant exchange gains of company A, and of |
| |
each company connected with company A, that would have |
| 5 |
arisen in accounting periods of those companies that end on |
| |
| |
(b) | the sum of the relevant exchange losses of those companies |
| |
that would have arisen in such accounting periods, |
| |
| if exchange gains and losses of those companies in those accounting |
| 10 |
periods were calculated in accordance with section 606D |
| |
(counterfactual currency movement assumptions). |
| |
(6) | For the purposes of subsections (4) and (5), an accounting period of |
| |
company A, or of a company connected with company A, in which |
| |
the test day falls and that does not end on that day is to be treated as |
| 15 |
if it did end on that day. |
| |
(7) | In this section “the matching rules” means— |
| |
(a) | section 328(3) and (4), and |
| |
(b) | section 606(3) and (4). |
| |
606B | Meaning of “relevant exchange gain” and “relevant exchange loss” |
| 20 |
(1) | For the purposes of section 606A an exchange gain or loss of a |
| |
company is “relevant” if— |
| |
(a) | it arises in relation to— |
| |
(i) | an asset or liability representing a loan relationship to |
| |
which the company is a party, or |
| 25 |
(ii) | a relevant contract to which the company is a party, |
| |
(b) | the loan relationship or relevant contract is part of the |
| |
| |
(c) | a debit or credit in respect of the exchange gain or loss is |
| |
required to be brought into account by the company for the |
| 30 |
purposes of corporation tax. |
| |
(2) | For the purposes of subsection (1)(c)— |
| |
(a) | the arrangements are to be treated as not having a one-way |
| |
exchange effect in relation to the company for the purposes of |
| |
section 328 or 606 (whether or not they would have such an |
| 35 |
effect apart from this subsection), and |
| |
(b) | sections 441 and 442 (loan relationships: unallowable |
| |
purposes) and 690 to 692 (derivative contracts: unallowable |
| |
purposes) are to be disregarded. |
| |
606C | Meaning of “test day” |
| 40 |
(1) | This section makes provision for the purposes of section 606A as to |
| |
whether a day in an accounting period of company A is a “test day”. |
| |
(2) | In the case of arrangements that include one or more options, a day |
| |
in the accounting period is a “test day” if it is— |
| |
(a) | a day on which such an option is exercised, |
| 45 |
(b) | a day on which such an option that is not exercised in the |
| |
accounting period was capable of being exercised, |
| |
|
| |
|
| |
|
(c) | a day on which company A, or a company connected with |
| |
company A, ceased to be a party to such an option, |
| |
(d) | a day on which a terms of such an option are varied, or |
| |
(e) | the last day of the accounting period. |
| |
(3) | In the case of arrangements that include one or more relevant |
| 5 |
contingent contracts, a day in the accounting period is a “test day” if |
| |
| |
(a) | a day on which an operative condition of such a contract is |
| |
| |
(b) | a day on which company A, or a company connected with |
| 10 |
company A, ceased to be a party to such a contract, |
| |
(c) | a day on which a terms of such a contract are varied, or |
| |
(d) | the last day of the accounting period. |
| |
606D | Counterfactual currency movement assumptions |
| |
(1) | This section makes provision for the purposes of section 606A(5) as |
| 15 |
to the calculation of exchange gains and losses of a company arising |
| |
in an accounting period of that company. |
| |
(2) | Where the relevant foreign currency appreciates over the accounting |
| |
period, or any part of the accounting period, relative to the operating |
| |
currency of company A by any percentage, the calculation must be |
| 20 |
made on the assumption that the relevant foreign currency instead |
| |
depreciates (over the same period and in relation to the same |
| |
currency) by that percentage. |
| |
(3) | Where the relevant foreign currency depreciates over the accounting |
| |
period, or any part of the accounting period, relative to the operating |
| 25 |
currency of company A by any percentage, the calculation must be |
| |
made on the assumption that the relevant foreign currency instead |
| |
appreciates (over the same period and in relation to the same |
| |
currency) by that percentage. |
| |
(4) | For provision as to the treatment of certain options for the purposes |
| 30 |
of the calculation in cases in which subsection (2) or (3) applies, see |
| |
| |
(5) | Except as provided for in that section, the calculation must be made |
| |
on the basis of transactions in fact entered into (and not on the basis |
| |
of transactions that would have been entered into on the assumption |
| 35 |
specified in subsection (2) or (3)). |
| |
(6) | In this section “relevant foreign currency” means— |
| |
(a) | the currency in which the loan relationships or relevant |
| |
contracts in respect of which the exchange gains or losses |
| |
arise are denominated, or |
| 40 |
(b) | where the exchange gains or losses arise in respect of loan |
| |
relationships or relevant contracts denominated in more than |
| |
one currency, any of them. |
| |
(7) | References in this section to the “operating currency” of a company, |
| |
in relation to an accounting period, are (subject to subsection (8)) to |
| 45 |
the currency in which profits or losses of the company arising in that |
| |
accounting period that fall to be computed in accordance with |
| |
generally accepted accounting practice for corporation tax purposes |
| |
|
| |
|
| |
|
are required to be computed by virtue of section 92(1), 92A(2), |
| |
92B(2)(a) or 92C(3)(a) of FA 1993 (foreign currency accounting). |
| |
(8) | In relation to a loan relationship or relevant contract to which a |
| |
company is deemed to be a party under— |
| |
(a) | section 381(2) and (3) (loan relationships involving firms), or |
| 5 |
(b) | section 620(2) (relevant contracts involving firms), |
| |
| references in this section to the “operating currency” of the company, |
| |
in relation to an accounting period, are to the currency that would be |
| |
the operating currency of that firm in that accounting period if that |
| |
| 10 |
606E | Counterfactual currency movement assumptions: treatment of options |
| |
(1) | This section applies in relation to the calculation for the purposes of |
| |
section 606A(5) of exchange gains and losses of a company arising in |
| |
an accounting period of that company where— |
| |
(a) | the calculation is made on the assumption specified in |
| 15 |
subsection (2) or (3) of section 606D (“the relevant |
| |
| |
(b) | an option is part of the arrangements. |
| |
(2) | Subsection (3) applies if the option is exercised on the test day. |
| |
(3) | The option is to be treated as not having been exercised on the test |
| 20 |
day if, on the relevant assumption, it is in all the circumstances more |
| |
likely than not that it would not have been exercised on that day. |
| |
(4) | Subsection (5) applies if the option is not exercised on the test day but |
| |
was exercisable on that day. |
| |
(5) | The option is to be treated as having been exercised on the test day |
| 25 |
if, on the relevant assumption, it is in all the circumstances more |
| |
likely than not that it would have been exercised on that day. |
| |
| |
(1) | In the Part 7 one-way exchange effect provisions “option” is to be |
| |
construed as if section 580(2) and (3) (meaning of option) were |
| 30 |
| |
(2) | For the purposes of the Part 7 one-way exchange effect provisions— |
| |
(a) | section 584 (hybrid derivatives with embedded derivatives) |
| |
is to be construed as if in subsection (1)(b) for the words “in |
| |
accordance with generally accepted accounting practice, the |
| 35 |
company treats” there were substituted “it is possible to |
| |
| |
(b) | section 585 (loan relationships with embedded derivatives) is |
| |
to be construed as if in subsection (1) for the words “in |
| |
accordance with generally accepted accounting practice a |
| 40 |
company treats” there were substituted “it is possible to |
| |
| |
(c) | section 586 (other contracts with embedded derivatives) is to |
| |
be construed as if in subsection (1)(b) for the words “in |
| |
accordance with generally accepted accounting practice, |
| 45 |
treats” there were substituted “it is possible to regard”. |
| |
|
| |
|
| |
|
606G | Meaning of “relevant contingent contract” and “operative condition” |
| |
(1) | In the Part 7 one-way exchange effect provisions “relevant |
| |
contingent contract” means a contract that meets the following two |
| |
| |
(2) | The first condition is that company A, or a company connected with |
| 5 |
company A (“the relevant company”), is a party to the contract. |
| |
(3) | The second condition is that the contract includes a condition— |
| |
(a) | on the meeting of which a right or liability under the contract |
| |
| |
(b) | that operates (directly or indirectly) by reference to the |
| 10 |
exchange rate between the operating currency of the relevant |
| |
company and another currency. |
| |
(4) | In this section “operating currency” has the same meaning as in |
| |
| |
(5) | In the Part 7 one-way exchange effect provisions, “operative |
| 15 |
condition” means a condition of the kind mentioned in subsection |
| |
| |
606H | Other interpretative provisions |
| |
(1) | In this Act “the Part 7 one-way exchange effect provisions” means |
| |
sections 606A to 606G and this section. |
| 20 |
(2) | The following provisions of this section have effect for the purposes |
| |
of the Part 7 one-way exchange effect provisions. |
| |
(3) | References to arrangements include any agreements, |
| |
understandings, schemes, transactions or series of transactions |
| |
(whether or not legally enforceable). |
| 25 |
(4) | The circumstances to be taken into account in determining whether |
| |
a loan relationship or relevant contract is “part of” any arrangements |
| |
| |
(a) | the circumstances in which it was entered into, acquired or |
| |
| 30 |
(b) | the currency in which it is denominated, and |
| |
| |
(5) | References to the currency in which a relevant contract is |
| |
denominated are to the currency in which its underlying subject |
| |
| 35 |
(6) | A currency (“currency A”) appreciates relative to another currency |
| |
(“currency B”) over a period if— |
| |
(a) | the value expressed in currency B of one unit of currency A at |
| |
the end of the period, exceeds |
| |
(b) | the value expressed in currency B of one unit of currency A at |
| 40 |
the beginning of the period, |
| |
| and the percentage of the appreciation is the amount determined |
| |
| |
(7) | The percentage of the appreciation is— |
| |
|
| |
|
| |
|
(a) | the difference between the amounts mentioned paragraphs |
| |
(a) and (b) of subsection (6), expressed as a percentage of the |
| |
amount mentioned in that paragraph (b), or |
| |
| |
(8) | A currency (“currency A”) depreciates relative to another currency |
| 5 |
(“currency B”) over a period if— |
| |
(a) | the value expressed in currency B of one unit of currency A at |
| |
the end of the period, is less than |
| |
(b) | the value expressed in currency B of one unit of currency A at |
| |
the beginning of the period, |
| 10 |
| and the percentage of the depreciation is the difference, expressed as |
| |
a percentage of the amount mentioned in paragraph (b). |
| |
(9) | References in this section to a company connected with company A |
| |
are to a company connected with company A for the relevant |
| |
| 15 |
(10) | Section 466 (companies connected for an accounting period) applies |
| |
for the purposes of subsection (9). |
| |
(11) | “Tax advantage” has the meaning given by section 840ZA of ICTA. |
| |
(12) | See section 606A for the meaning of the following expressions— |
| |
| 20 |
| |
“the relevant accounting period”; |
| |
| |
8 | Immediately before section 607 (pre-contract or abortive expenses) insert— |
| |
| 25 |
| |
9 | In Schedule 4 to CTA 2009 (index of defined expressions), insert at the |
| |
| |
| “the Part 5 one-way exchange effect provisions |
| | | | | “the Part 7 one-way exchange effect provisions |
| | | 30 |
|
| |
10 | The Loan Relationships and Derivative Contracts (Disregard and Bringing |
| |
into Account of Profits and Losses) Regulations 2006 (S.I. 2006/843) are |
| |
| |
| 35 |
11 (1) | The amendments made by this Schedule have effect— |
| |
(a) | in relation to exchange gains and losses arising in accounting periods |
| |
beginning on or after 22 April 2009, and |
| |
|
| |
|
| |
|
(b) | subject to the following provisions of this paragraph, in relation to |
| |
exchange gains and losses arising in straddling accounting periods. |
| |
(2) | In this paragraph “straddling accounting period” means an accounting |
| |
| |
(a) | begins before 22 April 2009, and |
| 5 |
(b) | ends on or after that date. |
| |
(3) | An exchange gain or loss that arises in a straddling accounting period in |
| |
| |
(a) | an asset or liability representing a loan relationship, or |
| |
(b) | a derivative contract, |
| 10 |
| is to be treated for the purposes of this paragraph as if it were made up of |
| |
| |
(4) | Those two amounts are the exchange gains or losses that would arise in |
| |
relation to the loan relationship or derivative contract in— |
| |
(a) | that part of the period that falls before 22 April, and |
| 15 |
(b) | that part of the period that falls on or after that date, |
| |
| if those parts were separate accounting periods. |
| |
(5) | The amendments made by this Schedule have effect, in relation to an |
| |
exchange gain or loss of the kind mentioned in sub-paragraph (3), as if the |
| |
gain or loss were the amount determined in relation to it under sub- |
| 20 |
| |
| |
| |
| |
| |
| 25 |
Meaning of “offshore fund” |
| |
| |
1 | FA 2008 is amended as follows. |
| |
2 | Before section 41 (tax treatment of participants in offshore funds) insert— |
| |
“40A | Meaning of “offshore fund” |
| 30 |
(1) | This section and sections 40B to 40G have effect for this group of |
| |
| |
(2) | “Offshore fund” means— |
| |
(a) | a mutual fund constituted by a body corporate resident |
| |
outside the United Kingdom, |
| 35 |
(b) | a mutual fund under which property is held on trust for the |
| |
participants where the trustees of the property are not |
| |
resident in the United Kingdom, or |
| |
(c) | a mutual fund constituted by other arrangements that create |
| |
rights in the nature of co-ownership where the arrangements |
| 40 |
|
| |
|
| |
|
take effect by virtue of the law of a territory outside the |
| |
United Kingdom (but see subsection (3)). |
| |
(3) | Subsection (2)(c) does not include a mutual fund constituted by two |
| |
or more persons carrying on a trade or business in partnership. |
| |
(4) | “This group of sections” means this section and sections 40B to 42A. |
| 5 |
(5) | References to participants in arrangements (or a fund) are to persons |
| |
taking part in the arrangements (or the arrangements constituting |
| |
the fund), whether by becoming the owner of, or of any part of, the |
| |
property that is the subject of the arrangements or otherwise (and |
| |
references to participation in arrangements or a fund, however |
| 10 |
expressed, are to be read accordingly). |
| |
| |
“body corporate” does not include a limited liability |
| |
| |
“co-ownership” is not restricted to the meaning of that term in |
| 15 |
the law of any part of the United Kingdom. |
| |
40B | Meaning of “mutual fund” etc |
| |
(1) | “Mutual fund” means arrangements with respect to property of any |
| |
description, including money, that meet conditions A to C, subject |
| |
| 20 |
(a) | sections 40C and 40D, and |
| |
(b) | the exceptions made by or under sections 40E to 40G. |
| |
(2) | Condition A is that the purpose or effect of the arrangements is to |
| |
| |
(a) | to participate in the acquisition, holding, management or |
| 25 |
disposal of the property, or |
| |
(b) | to receive profits or income arising from the acquisition, |
| |
holding, management or disposal of the property or sums |
| |
paid out of such profits or income. |
| |
(3) | Condition B is that the participants do not have day-to-day control of |
| 30 |
the management of the property. |
| |
(4) | For the purpose of condition B a participant does not have day-to- |
| |
day control of the management of property by virtue of having a |
| |
right to be consulted or to give directions. |
| |
(5) | Condition C is that, under the terms of the arrangements, a |
| 35 |
reasonable investor participating in the arrangements would expect |
| |
to be able to realise all or part of an investment in the arrangements |
| |
on a basis calculated entirely, or almost entirely, by reference to— |
| |
(a) | the net asset value of the property that is the subject of the |
| |
| 40 |
(b) | an index of any description. |
| |
(6) | The Treasury may by regulations amend condition C. |
| |
40C | Umbrella arrangements |
| |
(1) | In the case of umbrella arrangements— |
| |
|
| |
|