Income Tax (Trading and Other Income) Act 2005 section 149

Taxation of amounts taken to reserves

Section 149 deals with how fair value gains and losses on securities held by dealers must be brought into the trading profit calculation, even when those amounts are taken to reserves rather than to the profit and loss account.

• Where a trader holds securities and profits from their sale would form part of trading profits, fair value gains and losses recognised in the statement of recognised gains and losses or statement of changes in equity must be included in the trading profit calculation
• This prevents traders from keeping fair value movements out of taxable profits simply because accounting standards direct certain gains and losses to reserves rather than to the profit and loss account
• Amounts already brought into account in an earlier period, and amounts recognised as corrections of fundamental errors, are excluded to prevent double counting
• Securities for this purpose includes shares, unit trust rights, rights in certain offshore funds, and members' interests in companies without share capital, but excludes loan relationships