Finance Act 2004

Section 52

SCHEDULE 10U.K.Amendment of enactments that operate by reference to accounting practice

Part 1U.K.Loan relationships

Main computational provisionsU.K.

F11U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5U.K.In section 88 of that Act (exemption from section 87 in certain cases), omit subsection (2)(b) and subsection (3)(b).

F26U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7U.K.Omit section 90 of that Act (changes of accounting method).

F38U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9F4(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

(2)Where at the relevant time a company holds an asset to which section 92 applies—

(a)section 92(7) (deemed disposal and re-acquisition) shall have effect as if the asset had ceased at that time to be an asset to which that section applied (but without ceasing to represent a creditor relationship of the company), and

(b)any amount falling to be brought into account under the Taxation of Chargeable Gains Act 1992 (c. 12) shall be brought into account in accordance with section 92(4) accordingly.

(3)The relevant time for this purpose is immediately before the end of the last period of account before that in relation to which sub-paragraph (1) has effect (see section 52(3) of this Act).

10U.K.Omit section 92A of that Act (convertible securities etc.: debtor relationships).

11(1)Omit sections 93, 93A and 93B of that Act (relationships linked to the value of chargeable assets).U.K.

(2)Where at the relevant time a company holds an asset to which section 93 applies—

(a)section 93B (deemed disposal and re-acquisition) shall have effect as if the asset had ceased at that time to be an asset to which section 93 applied (but without ceasing to represent a creditor relationship of the company), and

(b)any amount falling to be brought into account under the Taxation of Chargeable Gains Act 1992 (c. 12) shall be brought into account in accordance with section 93(4) accordingly.

(3)The relevant time for this purpose is immediately before the end of the last period of account before that in relation to which sub-paragraph (1) has effect (see section 52(3) of this Act).

F512U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F613U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F714U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15U.K.In section 96 of that Act (special rules for certain other gilts), omit subsection (3).

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F917U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special computational provisionsU.K.

18U.K.Schedule 9 to the Finance Act 1996 (c. 8) (loan relationships: special computational provisions) is amended as follows.

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F1020U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1021U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1022U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1023U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1124U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1225U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1326U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1427U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1528U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29U.K.In paragraph 10A (deemed disposal on company ceasing to be resident in UK etc.), omit sub-paragraph (5).

F1630U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1631U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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F1633U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1634U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1635U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1636U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Collective investment schemes etc.U.K.

F1637U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1638U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1639U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1640U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1641U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1642U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequential amendmentsU.K.

F1743U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1844U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45U.K.In Schedule 28A of that Act (change in ownership of investment company), in paragraphs 7(1)(d)(ii) and (e)(ii), 11(1)(a) and (3)(c) and 16(1)(d)(ii) and (e)(ii) for “authorised accruals” substitute “ amortised cost ”.

46U.K.In paragraph 7(3) of Schedule 26 to the Transport Act 2000 (c. 38) (transfers under that Act), for “an authorised accounting method” substitute “ a basis of accounting ”.

Part 2U.K.Derivative contracts

Method of taxationU.K.

F1947U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1948U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting methodsU.K.

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F1950U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1951U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special provision for bad debt etc.U.K.

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F1953U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special computational provisionsU.K.

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F1958U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Collective investment schemesU.K.

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F1960U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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F1962U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1963U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MiscellaneousU.K.

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F1967U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

InterpretationU.K.

F1968U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1969U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequential amendmentU.K.

F2070U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 3U.K.Intangible fixed assets

Excluded assets: assets in respect of which capital allowances previously madeU.K.

F2171U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustment on change of accounting policyU.K.

F2272U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

References to amounts recognised in profit and loss accountU.K.

F2373U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequential amendmentsU.K.

F2474U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2475U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2476U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 4U.K.Foreign currency accounting

Main provisionsU.K.

77U.K.For sections 92 to 94AB of the Finance Act 1993 (c. 34) (corporation tax: currency) substitute—

“Corporation tax: currencyU.K.

The basic rule: sterling to be usedU.K.

92The basic rule: sterling to be used

(1)For the purposes of corporation tax the profits of a company for an accounting period must be computed and expressed in sterling.

(2)The following sections contain further provision as to the application of subsection (1) to certain profits or losses falling to be computed in accordance with generally accepted accounting practice—

• section 92A (company operating in sterling and preparing accounts in another currency);

• section 92B (company operating in currency other than sterling and preparing accounts in another currency);

• section 92C (company preparing accounts in currency other than sterling).

Company operating in sterling and preparing accounts in another currencyU.K.

92ACompany operating in sterling and preparing accounts in another currency

(1)This section applies if, for a period of account, in accordance with generally accepted accounting practice, a company resident in the United Kingdom—

(a)prepares its accounts in a currency other than sterling, and

(b)in those accounts identifies sterling as its functional currency.

(2)Profits or losses of the company for the period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes must be computed in sterling as if the company prepared its accounts in sterling.

Company operating in currency other than sterling and preparing accounts in another currencyU.K.

92BCompany operating in currency other than sterling and preparing accounts in another currency

(1)This section applies if, for a period of account, in accordance with generally accepted accounting practice—

(a)a company resident in the United Kingdom prepares its accounts in one currency,

(b)in those accounts it identifies another currency as its functional currency, and

(c)that currency is not sterling.

(2)Profits or losses of the company for the period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes must be computed in sterling by—

(a)computing those profits or losses in the functional currency as if the company prepared its accounts in that currency, and

(b)taking the sterling equivalent of those profits or losses.

(3)Where this section applies, it shall be assumed that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the functional currency of the company.

Company preparing accounts in currency other than sterlingU.K.

92CCompany preparing accounts in currency other than sterling

(1)This section applies in relation to a company resident in the United Kingdom if, for a period of account—

(a)the company prepares its accounts in a currency other than sterling (the “accounts currency”), and

(b)neither section 92A nor section 92B applies.

(2)This section also applies in relation to a company that is not resident in the United Kingdom if, for a period of account, the company prepares its return of accounts in a currency other than sterling (the “accounts currency”).

(3)Profits or losses of the company for the period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes must be computed in sterling by—

(a)computing those profits or losses in the accounts currency, and

(b)taking the sterling equivalent of those profits or losses.

(4)Where this section applies, it shall be assumed that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

Translating amounts into equivalent in different currencyU.K.

92DTranslating amounts into equivalent in different currency

(1)Where, for the purposes of computing the profits or losses of a company for an accounting period, an amount is required by section 92B or 92C to be translated—

(a)into its sterling equivalent, or

(b)into its equivalent expressed in the functional currency or the accounts currency of the company,

the translation must be made by reference to the appropriate exchange rate.

(2)The “appropriate exchange rate”is—

(a)the average exchange rate for the current accounting period, or

(b)an appropriate spot rate of exchange for the transaction in question.

Meaning of “accounts”, “return of accounts” and “functional currency”U.K.

92EMeaning of “accounts”, “return of accounts” and “functional currency”

(1)References in sections 92A to 92C to the “accounts”of a company resident in the United Kingdom are to—

(a)the annual accounts of the company required by Part 7 of the Companies Act 1985 or Part 8 of the Companies (Northern Ireland) Order 1986; or

(b)if the company is not required to prepare such accounts, the accounts which it is required to keep under the law of the country or territory under whose laws the company is incorporated; or

(c)if the company is not so required to keep accounts, such of its accounts as most closely correspond to accounts which it would have been required to prepare if the provisions of Part 7 of the Companies Act 1985 applied to it.

(2)The reference in section 92C to the “return of accounts”of a company not resident in the United Kingdom is to a return of such accounts of its permanent establishment in the United Kingdom as may be required by the Inland Revenue under paragraph 3 of Schedule 18 to the Finance Act 1998 (company tax returns).

(3)References in sections 92A, 92B and 92D to a company’s “functional currency”are to the currency of the primary economic environment in which the company operates.”.

Consequential amendmentsU.K.

F2578U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F26Transitional provisionU.K.

79U.K.Where a company carries forward to its first period of account beginning on or after 1st January 2005 an amount by way of—

(a)management expenses brought forward under section 75 of the Taxes Act 1988,

(b)losses brought forward under section 392B or 393 of that Act, or

(c)non-trading deficits on loan relationships brought forward under section 83 of the Finance Act 1996,

that amount shall be translated into sterling using the London closing exchange rate for the last day of the previous period of account.]