Corporation Tax Act 2009 section 128

Taxation of amounts taken to reserves

Section 128 ensures that fair value gains and losses on securities held by banks, insurers, and securities dealers are taxed even when those amounts bypass the profit and loss account and are instead recognised in reserves or equity.

• Applies to companies carrying on banking, insurance, or securities dealing businesses where a profit on selling the securities would normally be a trading receipt
• Fair value profits and losses on securities that are recognised in a statement of recognised gains and losses or statement of changes in equity (rather than in profit and loss) must still be brought into account for tax purposes as trading profits or losses
• Amounts already taxed in an earlier period and amounts recognised as corrections of fundamental accounting errors are excluded from this treatment
• Securities for these purposes include shares, unit trust rights, and membership interests in companies without share capital, but exclude loan relationships