Finance Act 2007

Exchange gains and losses where loan not on arm’s length terms

15 (1) In paragraph 11A of Schedule 9 to FA 1996 (exchange gains and losses where loan not on arm’s length terms), insert at the end—

“(7) Where—

(a) a company would be treated as having a debtor relationship in any accounting period if a claim were made under paragraph 6D(2) of Schedule 28AA to the Taxes Act 1988 in relation to that period, and

(b) for that period there is a connection between that company and the company which would have the corresponding creditor relationship,

it shall be assumed that such a claim is made for the purpose of determining the debits or credits to be brought into account for the purposes of this Chapter in respect of any exchange gains or losses arising in that period in respect of the liability representing that debtor relationship.

(8) Section 87(3) and (4) (connection between a company and another person) apply for the purposes of sub-paragraph (7)(b) above as they apply for the purposes of section 87.

(9) Where, by virtue of any claim made (or assumed by virtue of sub-paragraph (7) above to be made) under paragraph 6D(2) of Schedule 28AA to the Taxes Act 1988, more than one company is treated for any purpose as having a debtor relationship represented by the same liability—

(a) the total debtor exchange gains must not exceed the total creditor exchange losses, and

(b) the total debtor exchange losses must not exceed the total creditor exchange gains.

(10) For the purposes of sub-paragraph (9) above—

(a) any reference to the total debtor exchange gains is to the total amount of the credits brought into account for the purposes of this Chapter in respect of exchange gains from those debtor relationships,

(b) any reference to the total debtor exchange losses is to the total amount of the debits brought into account for those purposes in respect of exchange losses from those debtor relationships,

(c) any reference to the total creditor exchange gains is to the total amount of the credits brought into account for those purposes in respect of exchange gains from the corresponding creditor relationship, and

(d) any reference to the total creditor exchange losses is to the total amount of the debits brought into account for those purposes in respect of exchange losses from that relationship.”

(2) The amendment made by sub-paragraph (1) has effect in relation to loan relationships of any company in accounting periods ending on or after 6th December 2006.

(3) But, in relation to an accounting period of any company beginning before that date, that amendment has no effect if the company ceases to be a party to the loan relationship before that date.