188体育

Relevant Scheme Profits

Where a company has made scheme profits (CFM63360) as part of a risk transfer scheme, a proportion of those profits will be available for offset by 鈥榬ing-fenced scheme losses鈥�.

The rules for calculating the amount of profit available for offset by ring-fenced scheme losses are at CTA10/S937F and are calculated using the following formula:

(A-B-C)/A

A = The total of the scheme profits made in the period in relation to the scheme by the members of the relevant group

B = The total of the scheme losses made in the period in relation to the scheme by the members of the relevant group

C= The pre-tax economic profit from the scheme

Pre-tax economic loss

The 鈥榩re-tax economic profit鈥� is the overall economic profit that the group makes, as a whole, by virtue of being party to the scheme, and prior to any tax implications.

Example

Using the example at CFM63320, and assuming that sterling has appreciated by 10% against yen, we can see how this works:

A = The profit on the yen borrowing (see CFM63360) = 拢13.9m

B = 拢0 (there are no losses made on any loan relationship or derivative contract)

C = The overall pre-tax profit made from the scheme - i.e. the profit on the yen borrowing of 拢13.9m less the loss made on the shareholding of 拢10m = 拢3.9m

So, the relevant proportion of the 鈥榮cheme profit鈥� that is a 鈥榬elevant scheme profit鈥� is (拢13.9m - 拢0 - 拢3.9m) / 拢13.9m = 71.2%.

As the 鈥榮cheme profit鈥� was 拢13.9m, the 鈥榬elevant scheme profit鈥� is 72% of 拢13.9m = 拢10m