The amendments are being made in response to representations on the Finance Bill clauses. They do three things:-

* They allow a non-resident company trading in the United Kingdom through a branch to follow its own accounting treatment where the branch accounts are drawn up in sterling but there is a part of the branch business which is accounted for in a different currency

* They make the use of average rates of exchange for a period more flexible by removing the requirement that the average be for a period that ends on a particular day. The period may alternatively be up to three months so long as it contains a relevant day. A minor correction is also made to the definition of “average arm’s length exchange rate”.

* They recast the anti-avoidance provision – the new section 135A Finance Act 1993. The revisions make it clear that it is the total effect of the company’s arrangements that is relevant, and not the effect of individual transactions. Guidance will be published in due course that will make it clear how and in what circumstances the Inland Revenue would expect the section to apply and to illustrate the sort of cases in which the Board would or would not sanction a determination of an adjustment under the section, using its oversight powers in section 110 Finance Act 1998.


1. A Press Release (“Improving The Tax System For International Companies”) announcing the Government’s intention to include legislation in the Finance Bill 2000 was published on 14 January 2000. A further Press Release (“Improving The Tax System For International Companies: Draft Clauses for Consultation”) was issued on 8 February, together with two draft clauses and a commentary.

2. Budget Day Press Release REV/C&E2 (“A more competitive environment for business”) also mentioned the change as increasing the attraction of the UK as a base for group financial and treasury operations, and reducing the need for costly hedging arrangements.

3. A further Press Release (“Improving The Tax System For International Companies: Finance Bill Clauses”) was published on 7 April 2000 setting out the results of consultation on the draft clauses and detailing the changes made as a result of that consultation.

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