Taxes Consolidation Act 1997 Schedule 17A paragraph 4

Transitional measures (gains and losses in financial instruments)

Paragraph 4 provides transitional measures for dealing with gains and losses on financial assets and liabilities where a company moves to relevant accounting standards (IFRS), to prevent double counting or non-counting of unrealised gains and losses for tax purposes.

• Where a company changes to IFRS, a "deductible amount" is calculated (unrealised losses that might not be counted, plus unrealised gains that might be double counted), and a "taxable amount" is calculated (unrealised gains that might not be counted, plus unrealised losses that might be double counted).
• If the taxable amount exceeds the deductible amount, the excess is treated as a trading receipt spread over a five-year period; if the deductible amount exceeds the taxable amount, the excess is treated as a deductible trading expense spread over the same period.
• An anti-avoidance rule applies where a company, in the six months before moving to IFRS, disposes of financial assets or liabilities and replaces them with similar instruments within four weeks before or after the disposal — any such loss is also spread over five years.
• If the company ceases to trade during the five-year spreading period, any remaining balance of the spread amount is brought into account in the final accounting period.