Office of Public Sector Information
SCHEDULE 10 continued PART 2 continued
70 In section 440 of the Taxes Act 1988 (insurance companies: transfers of assets etc.), in subsection (2B) (treatment of derivative contract), for the words from “any authorised accounting method” to “shall be applied” substitute “Schedule 26 to the Finance Act 2002 applies”.
71 In Part 10 of Schedule 29 to the Finance Act 2002 (c. 23) (excluded assets), after paragraph 73 (rights over tangible assets) insert—
73A (1) This Schedule does not apply to an intangible asset of a company in the following circumstances.
(2) The circumstances are that—
(a) the asset falls to be treated as an intangible asset in accounts of the company,
(b) in a previous period of account the asset fell to be treated as a tangible asset in accounts of the company, and
(c) an allowance under Part 2 of the Capital Allowances Act (plant and machinery allowances) was made to the company in respect of the asset on the latter basis.”.
72 In Part 13 of that Schedule (supplementary provisions), after paragraph 116 insert—
116A (1) This paragraph applies where—
(a) there is a change of accounting policy in drawing up a company’s accounts from one period of account (the “earlier period”) to the next (the “later period”), and
(b) the approach in each of those periods accorded with the law and practice applicable in relation to that period.
(2) This paragraph applies, in particular, where—
(a) the company prepares accounts for the earlier period in accordance with UK generally accepted accounting practice and for the later period in accordance with international accounting standards, or
(b) the company prepares accounts for the earlier period in accordance with international accounting standards and for the later period in accordance with UK generally accepted accounting practice.
(3) If there is a difference between—
(a) the accounting value of an intangible fixed asset of the company at the end of the earlier period, and
(b) the accounting value of that asset at the beginning of the later period,
a corresponding debit or credit (as the case may be) shall be brought into account for tax purposes in the later period.
(4) The amount of the debit or credit to be brought into account for tax purposes is:
where—
Accounting Difference is the amount of the difference specified in sub-paragraph (3);
Tax Value is the tax written down value of the asset at the end of the earlier period; and
Accounting Value is the accounting value of the asset at the end of the earlier period.
(5) This paragraph does not apply in relation to an intangible fixed asset in respect of which an election has been made under paragraph 10 (election for writing down at fixed-rate).
(6) This paragraph does not apply to a difference between the accounting value of an intangible fixed asset in different periods of account to the extent that, in respect of that difference, a credit or debit is brought into account for tax purposes under—
(a) paragraph 12 (reversal of accounting gain),
(b) paragraph 15 (gain on revaluation), or
(c) paragraph 17 (reversal of accounting loss).
(7) Where or to the extent that an adjustment is made under this paragraph, no adjustment under Schedule 22 (computation of profits: adjustment on change of basis) shall be made.”.
73 (1) In Part 15 of that Schedule (interpretation) paragraph 134(a) (references to amounts recognised in profit and loss account) is amended as follows.
(2) After “statement of total recognised gains and losses” insert “, statement of changes in equity”.
(3) After paragraph (b) insert—
“other than an amount recognised for accounting purposes by way of correction of a fundamental error.”.
74 In paragraph 15(4) of that Schedule (credits on revaluation of intangible fixed assets)—
(a) in the definition of “Previous Debits”, after “accounting basis)” insert “or paragraph 116A (adjustment on change of accounting policy)”;
(b) in the definition of “Previous Credits”, at the end insert “or paragraph 116A (adjustment on change of accounting policy)”.
75 In paragraph 20 (1) of that Schedule (realisation of asset written down for tax purposes), after paragraph (b) insert “, or
(c) under paragraph 116A (adjustment on change of accounting policy).”
76 In paragraph 27 (1) of that Schedule (calculation of tax written down value of asset written down on accounting basis)—
(a) in the definition of “Debits”, after “paragraph 9” insert “or paragraph 116A (adjustment on change of accounting policy)”;
(b) in the definition of “Credits”, at the end insert “or paragraph 116A (adjustment on change of accounting policy)”.
77 For sections 92 to 94AB of the Finance Act 1993 (c. 34) (corporation tax: currency) substitute—
(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).
(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.
(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.
(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.
(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.
(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.”.
78 (1) Section 730BB of the Taxes Act 1988 (exchange gains and losses on sale and repurchase of securities) is amended as follows.
(2) In subsection (2)(c) for the words from “section 93 of the Finance Act 1993” to “sterling)” substitute “section 92B or 92C of the Finance Act 1993 (company preparing accounts or operating in currency other than sterling)”.
(3) In subsection (3)—
(a) in paragraph (a) for “section 93 of the Finance Act 1993” substitute “section 92B or 92C of the Finance Act 1993 (company preparing accounts or operating in currency other than sterling)”;
(b) in paragraph (b) for the words from “relevant foreign currency” to “the company” substitute “relevant currency”;
(c) in paragraph (c)(i) and (ii) for “relevant foreign currency” substitute “relevant currency”.
(4) After subsection (3) insert—
“(3A) In subsection (3), references to the relevant currency are—
(a) in cases in which section 92B of the Finance Act 1993 applies, to the functional currency (within the meaning of that section), and
(b) in cases in which section 92C of the Finance Act 1993 applies, to the accounts currency (within the meaning of that section).”
(5) Omit subsection (12).
Finance Act 2004