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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Foreign exchange: matching under the Disregard Regulations: extent of matching: regulation 3(4)

Limits of matching

This rule prevents the matching of an asset with a liability of greater value. It aims to replicate the accounting rule under SSAP 20 where any excess exchange difference on the liability was taken to profit and loss rather than reserves and taxed accordingly.

Where condition 2 applies (CFM62640), a loan relationships liability is treated as matched with an asset to the extent that the carrying value of the liability on acquisition or when the asset is acquired, if later, does not exceed the carrying value of the asset. For periods of account beginning on or after 1 January 2008, however, a loan relationships liability is treated as matched with an asset to the extent that the carrying value of the liability does not exceed the carrying value of the asset at ‘the relevant time’ (see CFM62790). CFM62710 explains what is meant by ‘carrying value’.