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UK Tax Issues in Derivatives and Hedge Accounting

Get to grips with how derivatives are accounted for and what adjustments may be needed when preparing the tax computations

UK Financial Services Regulation and Compliance Training

A half-day course

  • The course is highly practical and will include multiple examples to assist with understanding the rules
  • It is presented by an independent training professional and can be a completely independent look at the issues raised
  • The course will encourage participation and allow for all questions and clarifications to be considered
  • The course will always be completely current and relevant

  • Understand how derivatives are accounting for when acquired for speculative reasons and when acquired for different types of hedges (because the basic tax treatment follows the accounting treatment)
  • Understand how the primarily legislation taxes derivatives gains and losses
  • Identify when the secondary legislation may vary the basic tax treatment and in which scenarios this might be useful
  • Understand the tracking of cumulative derivative gains and losses that may be necessary for tax purposes when hedging the cost of an item of property, plant and equipment and how these cumulative amounts are brought into account later.

The Accounting Side

  • What is a derivative?
  • How derivatives are measured in the financial statements and where derivative profits and losses might be located
  • The difference between hedging and hedge accounting and why it is important
  • Fair value hedges and how they are accounted for
  • Cash flow hedges and how they should be accounted for
  • Net investment hedges
  • Examples to illustrate the different types of hedge and how they might be reflected in the financial statements
  • Extracts from real financial statements

The Tax Side

  • The primary legislation (CTA 2009) and how it treats derivative debits and credits
  • Derivatives taxed under chargeable gains rules
  • The secondary legislation (‘Disregard Regulations’) and how this can vary the tax treatment of derivative debits and credits
  • When the disregard regulations can be beneficial and the disadvantages of using them
  • When disregarded amounts are brought into account for tax purposes
  • Tax treatment of items of plant and machinery purchased when currency risk has been hedged
  • Deferred tax implications of hedging using derivatives and how this is reflected in the financial statements

Examples

  • Foreign currency hedging against future budgeted sales
  • Foreign currency hedging against future operating expenses
  • Interest rate hedging using swaps (floating to fixed and fixed to floating)
  • Long-term currency hedge of an order for a major asset

Q&As

  • The opportunity to raise examples you have come across and discuss the tax implications
  • Regular pauses for questions on each topic covered to take questions and queries
 

The trainer is a UK Chartered Accountant and Chartered Tax Advisor winning the John Wood Medal in the November 1995 CIOT sitting for the best paper on business taxation.

He was previously Director of Finance and Taxation Programmes at BPP Professional Education and has delivered IFRS, US GAAP, UK Tax and VAT to a multitude of organisations worldwide since 1992.

He has particular experience in delivering bespoke IFRS and US GAAP training programmes to multinationals in the financial services, transport and energy sectors as well as delivering UK tax and VAT update programmes to accounting and law firms.

The trainer is passionate about training and his enthusiasm ensures that the participants enjoy the learning experience whilst gaining knowledge through their engagement in the sessions and through encouraging them to ask questions and discuss practical issues they may have.

He also provides consultancy services to companies and accounting firms, including provision of tax and VAT advice, reviewing accounting policy manuals and advising on accounting treatments of various transactions.

This course is designed to help attendees appreciate the possible tax adjustments that may be needed where derivatives are used in hedging transactions.

As many of these are driven by the accounting treatment, it is important for tax practitioners to understand how the derivative (and any related item) have been accounted for and where to find the relevant entries in the financial statements, so the course ensures that this is fully exempt.

The tax treatment under the primary legislation will be explained and applied to different situations. This will then be supplemented by the secondary legislation which can vary the primary tax treatment. The pros and cons of using the secondary legislation will be discussed as well as the conditions to use it.

We will be using a multitude of examples to apply the rules in practice so that delegates have a full understanding of the tax consequences of a diverse range of transactions they may encounter.

  • Very clear and engaging presenter and excellent use of examples. I liked the way the course focussed on the accounting before moving on to the taxation.

Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements
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Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS
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