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HMRC internal manual

Corporate Finance Manual

Foreign exchange: matching under the Disregard Regulations: meaning of relevant time

Time at which net asset value is ascertained: periods of account beginning on or after 1 January 2008

Where a company elects to value shareholdings at the higher of the value shown in the accounts and the value of the net assets underlying the shares, that latter value may be subject to change, often on a daily basis. The legislation uses a snapshot of the value, taken at particular times - the ‘relevant time’.

Regulation 4B(2) sets out the meaning of ‘relevant time’ where an election has been made: it is the start of each review period in an accounting period.

Regulation 4C defines ‘review period’. It is a period of a length specified when the company makes the ‘net asset value matching’ election. It may specify the period in days, weeks or months, but the length of a period cannot exceed 92 days.

Where the company holds the matched shares at the beginning of an accounting period, the first review period begins on the first day of the accounting period. The next review period begins when the first has ended, and so on - see example 1 at CFM62800.

The last review period in an accounting period must end on or before the last day of the accounting period - see example 2.

In practice, a company that prepares monthly or quarterly management accounts may wish its review periods to coincide with the periods for which it prepares such accounts. A company may prepare management accounts for periods of differing lengths, for example they may cover 4 weeks in some months and 5 weeks in others. It is acceptable for a company to specify review periods to coincide with the management accounts - even if those periods are not always exactly the same length - provided that the company is able to give a formula that fixes when each review period will begin.

Further asset is acquired: regulation 4C(3)

If a company already holds matched shares (referred to in the legislation as ‘the first asset’) but subsequently acquires a new shareholding (or begins to hedge a shareholding that it already holds), the first review period in relation to the new shareholding begins when it starts to be matched.

However, this review period ends at the same time as the review period that is current for the ‘first asset’ - see example 3 at CFM62800. So thereafter the review periods will run in step.

Acquiring additional shares in an existing subsidiary does not amount to the acquisition of a new asset. This is because regulation 2(6) makes it clear that, for the purposes of regulations 3 to 5, all of the shares held in a particular company, whenever acquired, are a single asset.