CFM9201a - Taxing FOREX: basic rules
Different types of assets and liabilities: convertible securities
Interest, and only interest, on certain creditor relationships involving convertible securities was left within the loan relationship rules by FA96/S92. The FA 2002 changes mean that exchange gains and losses on these securities are also included in the loan relationship rules by FA96/S92 (2). But on disposal these securities fall within the CG rules and exchange gains and losses will be included in the CG computation. Double counting is prevented by FA96/S92 (5A). This works as follows:
- Any net exchange losses previously allowed are added to the consideration for the disposal.
- Any net exchange gains previously taxed are deducted from the consideration on disposal.
- In arriving at the net exchange gain or loss, a just and reasonable apportionment must be made for any accounting period in which the security was held, or was a S92- convertible security for only part of an accounting period. For more details on FA96/S92 see CFM6100+.
