Section 79B Matching of foreign currency assets with certain foreign currecny share capital
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Amendments
Section 79B inserted by Finance Act 2006 section 62.
(1)(a) In this section-
"foreign currency asset", in relation to a company, means an asset of the company -
(i) the consideration for the acquisition of which consisted solely of an amount denominated in a currency other than the [functional currency of the company]1, and
(ii) any gain on the disposal of which would be taken into account in computing income of the company chargeable to tax under Case I of Schedule D;
["functional currency" has the same meaning as in section 402;]2
"relevant foreign currency liability", in relation to a company, means a liability, not being a relevant monetary item (within the meaning of section 79) which arises from a sum subscribed for paid-up redeemable share capital of the company which is denominated in a currency other than the [functional currency of the company]3;
"rate of exchange" has the meaning assigned to it by section 79.
(b) For the purposes of this section-
(i) where at any time a company disposes of a foreign currency asset which has been matched with a corresponding relevant foreign currency liability and the company does not discharge the liability at that time, the company shall be deemed to discharge the liability, and to incur a new liability equal to the amount of the liability, at that time,
(ii) where in accordance with subsection (2) a company specifies that a foreign currency asset acquired by it at any time is to be matched with a corresponding relevant foreign currency liability incurred by it before that time, the company shall be deemed to discharge the foreign currency liability, and to incur a new liability equal to the amount of the liability, at that time, and
(iii) the amount of a gain or loss on the discharge of a relevant foreign currency liability shall be the amount which would be the gain accruing to, or as the case may be the loss incurred by, the company on the disposal of an asset acquired by it at the time the liability was incurred and disposed of at the time at which the liability was discharged if-
(I) the amount given by the company to discharge the liability was the amount given by the company as consideration for the acquisition of the asset, and
(II) the amount of the liability incurred by the company was the consideration received by the company on the disposal of the asset.
Amendments
1 Sustituted by Finance Act 2007 section 49(1)(a)(i) as on and from 1 January 2006.
2 Definition of "functional currency" inserted by Finance Act 2007 section 49(1)(a)(ii) as on and from 1 January 2006.
3 Sustituted by Finance Act 2007 section 49(1)(a)(iii) as on and from 1 January 2006.
(2)(a) A company may, by giving notice in writing to the inspector, specify that a foreign currency asset denominated in a currency other than the [functional currency of the company]1 shall be matched with such corresponding relevant foreign currency liability denominated in that currency as is specified by the company.
(b) A notice under paragraph (a) shall be given within 3 weeks after the acquisition by the company concerned of the foreign currency asset.
Amendments
1 Substituted by Finance Act 2007 section 49(1)(b) as on and from 1 January 2006.
(3) [Where, in relation to an accounting period of a company, a foreign currency asset]1 has been matched by the company under subsection (2) with a relevant foreign currency liability of the company, then any gain or loss, whether realised or unrealised, on the relevant foreign currency liability shall be taken into account in computing the trading income of the company [for that accounting period]2.
Amendments
1 Substituted by Finance Act 2007 section 49(1)(c)(i) as on and from 1 January 2006.
2 Inserted by Finance Act 2007 section 49(1)(c)(ii) as on and from 1 January 2006.
