This guidance applies for periods of account beginning on or after 1 January 2005
For issuers of an asset-linked security (apart from banks and other financial concerns issuing such securities for trade purposes), under the former rules in FA96/S93 the only amount brought in for tax purposes was interest payable in respect of the security. All other gains and losses, including exchange differences, were in effect tax nothings.
Where FA02/SCH26/PARA45K applies to a security which was issued before the first accounting period beginning on or after 1 January 2005, FA02/SCH26/PARA45KA provides that no amounts are to be brought in, in respect of such “existing liabilities”, under the derivative contracts rules. Gains or losses on such securities continue to be tax nothings.
This is complemented by regulation 12 of the Disregard Regulations ( CFM13270), which applies to such debtor loan relationships except where the company became party to the relationship in the ordinary course of a banking or security dealing business. The only debits that are allowed are those relating to interest (ascertained without reference to an effective interest method). Transitional adjustments are similarly disregarded (with regulation 12(3) of the Disregard Regulations applying to loan relationships amounts, and regulation 3C(2)(aa) to their derivative contract counterparts).
