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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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FA2010: risk transfer schemes: scheme losses and scheme profits

In order for the risk transfer scheme provisions to apply it is necessary to identify certain losses and profits that arise from the scheme. These are defined at CTA10/S937E.

A ‘scheme loss’ or ‘scheme profit’ is one that arises as a result of movements in the rate, index or value by virtue of which the scheme operates.

Additionally, the profit or loss must arise from a loan relationship or derivative contract that is part of the scheme that would (ignoring these provisions) have been brought into account within the loan relationship or derivative contract provisions (i.e. Part 5 or Part 7 of CTA09).

So, in the example at CFM63320, the scheme loss or scheme profit would be that which arises from yen/sterling exchange differences on the yen borrowing.

Accounting Periods

As different companies within the same group can have different accounting periods, CTA10/S937E(2) clarifies that if a scheme profit or loss is required to be calculated over a period that is not an accounting period of the relevant company, then scheme profits and losses should be calculated as though the relevant period is an accounting period of the company.