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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
, see all updates

Derivative contracts: hedging: Regulation 10A: bringing into account exchange gains excluded by Regulation 7A

This guidance applies to certain derivative contracts entered into on or after 1 January 2009

As any derivative contract entered into to which Regulation 7A applies is functioning to protect the capital raised from a share issue, any gains disregarded by Regulation 7A can be brought back into account to the extent that they are distributed out to shareholders.

To the extent that any such gain has been distributed out to shareholders, this is the amount that is brought back into account.

Where such a distribution takes place, the gain would be brought back into account in the accounting period in which the distribution takes place.

For the purposes of identifying such distributions, HMRC will accept that any amount in reserves that is represented by the gain on such a derivative contract would be the bottom slice of distributable profits. Consequently, and in reality, this provision is only likely to be relevant where a company distributes out the full amount of its distributable reserves.