Commentary

D1.716 Loan relationships—Recognition of profit

Corporate tax
Corporate tax | Commentary

D1.716 Loan relationships—Recognition of profit

Corporate tax | Commentary

D1.716 Loan relationships—Recognition of profit

Accounting periods beginning on or after 1 January 2016

For accounting periods beginning on or after 1 January 2016 the amounts that are brought into account in computing a company's loan relationship profits are amounts that, in accordance with generally accepted accounting practice, are recognised in the company accounts for the relevant period as an item of profit or loss. This includes amounts that were previously recognised as an item of other comprehensive income and have been transferred to become an item of profit or loss in determining the company's profit or loss for the relevant accounting period. The term 'item of profit or loss' and 'item of other comprehensive income' each has the meaning that it has for accounting purposes1. Transitional rules apply where amounts that were recognised in other comprehensive income for accounting periods beginning before 1 January 2016 were taken into account in computing a company's loan relationship profits for such accounting periods. An amount equal and opposite to the net debits or credits that have been so recognised (and have not been reversed to profit or loss before the start of the company's first accounting period beginning on or after 1 January 2016) is brought into account in computing the company's loan relationship profits over a five year period2.

Where, for accounting periods beginning on or after 1 January 2016, an accounting period does not coincide with a company's period of account (statutory accounting period) the company is deemed to have two

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