Corporation Tax Act 2009 section 328H

Other interpretative provisions

Section 328H provides definitions and interpretative rules needed to apply the one-way exchange effect provisions for loan relationships and derivative contracts.

• When determining whether a loan relationship or relevant contract forms part of an arrangement, particular regard must be given to the circumstances of entry, its currency, and its likely effect.
• The currency of a relevant contract is defined as the currency of its underlying subject matter, and specific rules explain how to measure appreciation or depreciation of one currency against another.
• Two companies are treated as connected for an accounting period if, at any time during that period, one controls the other or both are under common control, applying the same loan relationships definition of connection (including its exclusions, such as for entities under Crown control).
• Corresponding provisions apply to derivative contracts under Part 7 of CTA 2009, with restrictions ensuring that only the true foreign exchange element of a forward currency contract (excluding forward points) qualifies for forex matching, and exchange gains from one-way exchange effects conferring a non-negligible tax advantage cannot be matched.