Briefly, following the point that we have just discussed about derivative contracts, the clause also makes provision for a slight change to the calculation of the profits and losses of an open-ended investment company, otherwise known as an OEIC.
As things stand, capital profits and losses arising from a derivative contract during a period are taxed. Those capital profits and losses are picked up from the statement of total return, which, in turn, was included in the OEIC's accounts for the year under the statement of recommended practice that the Financial Services Authority issued in 2000. The offending provision referred to any amendment brought to the statement by the FSA. As I understand it, the FSA did not issue the update; rather the Investment Management Association did so. The words issued by the FSA have therefore been removed.
The clause and schedule 8 amend rules on derivatives entered into for an unallowable purpose, which were introduced under the Finance Act 2002. The changes are intended to make the rules work as they were originally supposed to, so that much of the debits and credits arising on the contract from unallowable contracts are taken out of the profits and losses that are taxed under the rules. If the debits referable to the unallowable purposes are higher than the credits, they can be carried forward and offset against credits in future periods. Previously, the net debits could be offset directly against the credits, but that has been changed to ensure that the net debits may be offset against credits only after other allowable debits have been offset. That technical change clarifies how the rules work. It should have been included in the previous legislation, so it is both necessary and welcome.
Question put and agreed to.
Clause 49 ordered to stand part of the Bill.
Schedule 9 agreed to.
Clause 50 ordered to stand part of the Bill.