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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Derivative contracts: hedging: Disregard Regulations overview

Overview of the Disregard Regulations

The Disregard Regulations have effect for periods of account beginning on or after 1 January 2005. They cover the following circumstances:

  • A company uses a liability (regulation 3) or a derivative contract (regulation 4) to hedge its holding of shares, ships or aircraft. Regulations 4A, 4B, 4C and 5 are supplementary to these. This section of the guidance does not cover regulations 3 to 5, see CFM62010+
  • Either a forecast transaction or firm commitment is hedged by a currency contract (regulation 7), a commodity / debt contract (regulation 8) or an asset, liability, receipt or expense is hedged by an interest rate contract (regulation 9). Guidance is at CFM57080+ for regulations 7 and 8 and at CFM57290+ for regulation 9.
  • If a company chooses not to elect into regulations 7, 8 and 9 (or has elected out under the previous rules), then regulation 9A will have effect for amounts recognised to reserves in respect of any designated cash flow hedge (see CFM57370 and CFM57420).
  • Regulation 10 sets out how fair value profits or losses that are disregarded under regulations 7 or 8 are brought back into account. Guidance is at CFM57210+.
  • Regulation 7A applies to derivative contracts hedging anticipated or future proceeds from certain issues of shares.
  • Regulations 11 and 12 are not concerned with hedging, but with transitional provisions relating to convertible and asset-linked securities.

Provisions for elections are contained in regulations 6 and 6A. The election rules were substantially revised in 2014 (see CFM57041). The effect of elections on transfers within groups is covered by regulation 6B (CFM57360+).

Regulation 2 contains various definitions.