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HMRC internal manual

Corporate Finance Manual

From
HM Revenue & Customs
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Old rules: loan relationships: authorised accounting methods: electing for mark to market

Electing for mark to market

This guidance applies to periods of account beginning before 1 January 2005

Where a company must produce accounts according to the legislation of its home state, FA96/S86(3A) allows it to elect to use mark to market for the purposes of corporation tax. A company can make the election as long as, were it subject to UK GAAP, it would use that method for some or all of its loan relationships.

The company must make the election within 2 years of the end of the first accounting period in which it enters into the loan relationship. If it was already party to such a loan relationship, the time limit is 2 years from the end of the first period beginning on or after 1 October 2002. The election applies for that and later accounting periods, covers all the company’s loan relationships (and derivative contracts) to which GAAP would apply the mark to market basis, and is irrevocable.

Mandatory mark to market

Where a company

  • must produce accounts according to the legislation of its home state, and
  • would have used mark to market for (some or all of) its loan relationships if it were a UK company following generally accepted accounting practice, and
  • mark to market has been used in the statutory accounts for (some or all of) the company’s derivative contracts

then the company must use mark to market for all those loan relationships to which GAAP would have applied that basis (FA96/S86(3D)).