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HMRC internal manual

Corporate Finance Manual

Derivative contracts: the matters and computational rules: exceptions from the basic rules

Exceptions to the basic rule

Although the basic computational rule for derivative contracts is that the credits and debits brought into account are those that are recognised in determining the company’s accounting profit or loss (see CFM51034 and, for company periods of account beginning before 1 January 2016, CFM51040), there are a number of cases where policy reasons dictate a departure from the accounts. This may be to facilitate certain types of transaction (for example, the group neutrality rules which stop profits or losses crystallising when derivative contracts are transferred between group companies); it may be to block avoidance; or it may be to lessen the volatility in companies’ tax liabilities that might otherwise arise where derivative contracts are accounted for at fair value.

Some of these departures from the accounts are explained in other chapters of this guidance. See in particular

This chapter deals with a number of special computational rules in Chapters 3 and 4 of CTA09/PT7. They fall broadly into three categories:

  • Situations in which it is mandatory for a company to use fair value accounting - CFM52020 
  • Adjustments on change of accounting policy - CFM52030 
  • Rules catering for special circumstances, mainly designed to give or accelerate tax relief - CFM52040 onwards.

Guidance on other provisions contained in Chapter 4 of Part 7 can be found as follows: