Profits and losses arising from loan relationships with embedded derivatives

11

1

For the purposes of section 85B(3) of the Finance Act 1996 (amounts recognised in determining company’s profits and loss)—

a

the amounts described in paragraph (2) are prescribed in relation to a company which is a party to a creditor relationship to which—

i

section 92 (convertible securities etc: creditor relationships) or 93 (relationships linked to the value of chargeable assets) of the Finance Act 19968 applies immediately before the start of the first accounting period of the company to begin on or after 1st January 2005, and

ii

section 94A of the Finance Act 19969 (loan relationships with embedded derivatives) applies in the first accounting period of the company to begin on or after 1st January 2005; and

b

the amounts described in paragraph (3) are prescribed in relation to a company which is a party to a creditor relationship to which section 92 or 93 of the Finance Act 1996 applies immediately before the start of the first accounting period of the company to begin on or after 1st January 2005.

2

The prescribed amounts are all credits and debits in respect of the host contract save for—

a

credits in relation to interest accruing in respect of the creditor relationship without regard to the amounts given by the effective interest method; and

b

credits and debits in respect of exchange gains and losses.

3

The prescribed amounts are all credits and debits save for—

a

credits in relation to interest, and

b

credits and debits in respect of exchange gains and losses.

12

1

For the purposes of section 85B(3) of the Finance Act 1996 the amounts described in paragraph (2) are prescribed in relation to a company which is a party to a debtor relationship to which—

a

section 92A (convertible securities etc: debtor relationships)10 or 93 of the Finance Act 1996 applies immediately before the start of the first accounting period of the company to begin on or after 1st January 2005, and

b

section 94A of the Finance Act 1996 applies in the first accounting period of the company to begin on or after 1st January 2005.

2

The prescribed amounts are all credits and debits in respect of the host contract save for—

a

debits in relation to interest accruing in respect of the debtor relationship without regard to the amounts given by the effective interest method; and

b

credits and debits in respect of exchange gains and losses.