Corporation Tax Act 2009 section 605

Credits and debits recognised in equity

Section 605 ensures that credits and debits relating to derivative contracts which are recognised directly in equity or shareholders' funds, rather than through the profit and loss account or other income statements, are still brought into account for corporation tax purposes.

• Where a credit or debit on a derivative contract is posted directly to equity or shareholders' funds rather than through the income statement, it must still be included in the tax computation.
• Such amounts are treated for tax purposes in the same way as if they had been recognised in the company's profit or loss account.
• This provision overrides the accounting treatment, ensuring that amounts bypassing the income statement are not overlooked for tax.
• The rule prevents companies from avoiding tax recognition of derivative contract gains or losses simply because accounting standards direct those items to equity rather than to profit or loss.