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HMRC internal manual

Corporate Finance Manual

Old rules: derivative contracts: basic rules pre FA 2004: reserves

Amounts taken to reserves

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

As indicated by the example in CFM84200, in some circumstances it is generally accepted accounting practice to carry the profits or losses to reserves, rather than the profit and loss account.

In such cases, FA02/SCH26/PARA15(3)(a) ensures that, despite this accountancy treatment, profits, gains or losses on derivative contracts taken to reserves are brought into account for tax purposes, except for amounts that must be transferred to the share premium account (FA02/SCH26/PARA15(2)).

The treatment of exchange gains and losses taken to reserves is different (FA02/SCH26/PARA16 - CFM62210 onwards).