Corporation Tax Act 2009 section 604A

Amounts recognised in other comprehensive income and not transferred to profit or loss

Section 604A deals with the tax treatment of amounts sitting in other comprehensive income when a derivative contract (or part of one) ceases to be recognised in a company's accounts and those amounts are not expected to recycle through profit or loss.

• When a derivative contract ceases to be recognised and amounts previously recorded in other comprehensive income are not expected to transfer to profit or loss, those amounts must be brought into account as taxable credits or allowable debits in the period the expectation arises
• Once brought into account under this rule, the amounts cannot be taxed again in a later period even if the accounting treatment subsequently transfers them to profit or loss
• The rule applies equally where only part of a derivative contract ceases to be recognised, but limited to the proportion of the other comprehensive income amounts attributable to that part
• When determining which amounts are caught, the company must assume that the accounting policy used for the current period also applied in earlier periods, unless the accounts for the current period are properly drawn up using a different assumption about past policies