PART 1 Introduction

Citation, commencement and effect

1. —(1) These Regulations may be cited as the Exchange Gains and Losses (Transitional Provisions and Savings) Regulations 2002 and shall come into force on 1st October 2002.

(2) These Regulations have effect in relation to accounting periods beginning on or after 1st October 2002.

PART 2 Saving of the Exchange Gains and Losses (Transitional Provisions) Regulations 1994 with modifications

Introduction

2.The Exchange Gains and Losses (Transitional Provisions) Regulations 1994( 2 ) are modified in accordance with regulations 3 to 11 below and, as modified, continue to have effect (notwithstanding the repeal of sections 164(14), 165(4) to (6) and 167(1) and (4) to (6) of, and Schedule 16 to, the Finance Act 1993( 3 ) by sections 79(1)(b) and 141 of, and Part 3(10) of Schedule 40 to, the Finance Act 2002).

Modification of regulation 1

3. In regulation 1(3)( 4 )—

(a) for sub-paragraph (g) substitute—

“ (g) “a regulation 6(3) asset” means an existing asset the basic valuation of which was determined for the purposes of Chapter II in accordance with regulation 6(3) of these Regulations; ” ;

(b) at the end of sub-paragraph (h) add

“ ; and

(i) “the relevant accounting period”, in relation to a company, means the company’s first accounting period to begin on or after 1st October 2002. ” .

Modification of regulation 2

4. In regulation 2(2)—

(a) omit “Sections 136, 137 and 139 to 141 of the 1993 Act;”;

(b) omit “The Exchange Gains and Losses (Deferral of Gains and Losses) Regulations 1994.”.

Omission of regulations 3 to 6

5. Omit regulations 3 to 6( 5 ).

Modification of regulation 7

6. n regulation 7(2)—

(a) after the definition of “the cumulative taxed loss” insert—

• “ “the final accounting period”, in relation to a company, means the company’s accounting period preceding the relevant accounting period; ” ;

(b) omit the words from “and any reference” to the end.

Modification of regulation 8

7. In regulation 8(5) for “above” substitute “of these Regulations”.

Modification of regulation 13

8. —(1) Modify regulation 13( 6 ) as follows.

(2) In paragraph (1) for “14(1) and 15(1)” substitute “14 and 14A”.

(3) After paragraph (1) insert—

“ (1A) For the purposes of paragraph (1)(a) above, the final accounting period shall be treated as the last accrual period as respects any asset or liability held or owed by the company immediately after the end of the final accounting period. ” .

(4) In paragraphs (2)(a), (b) and (c) and (3)(a), (b) and (c) for “before the end of the last accrual period” substitute “after the end of the final accounting period”.

(5) For paragraph (4) substitute—

“ (4) In paragraphs (2) and (3) above, a relevant gain or loss in relation to a regulation 6(3) asset is a chargeable gain or an allowable loss.

(4A) In relation to any asset other than a regulation 6(3) asset or any liability, an amount equal to the amount of any relevant gain or loss that is deemed to accrue to the company under paragraph (2) or (3) above shall be treated for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (according to whether it is a relevant gain or loss)—

(a) as a credit in respect of a loan relationship of the company, or

(b) as a debit in respect of a loan relationship of the company,

which falls to be brought into account under section 82(2) of that Act ( 7 ) . ” .

(6) Omit paragraphs (5) to (8).

Substitution of regulation 14

9. For regulation 14( 8 ) substitute—

“ Elections to defer bringing into account relevant gains and losses deemed to accrue immediately after the end of the final accounting period

14. —(1) In any case where, apart from this regulation, relevant gains or losses would accrue to a company immediately after the end of the final accounting period by virtue of regulation 13, the company may elect, by notice to the inspector within two years of the end of the final accounting period, that this regulation shall apply as respects—

(a) subject to paragraph (3) below, all relevant gains or losses to which paragraph (4) of regulation 13 would apply;

(b) all relevant gains or losses to which paragraph (4A) of that regulation would apply; or

(c) both.

An election under this paragraph shall be irrevocable.

(2) Where an election is made under paragraph (1) above, every gain or loss to which this regulation applies shall be treated as accruing only when the asset or liability to which the gain or loss relates ceases to be held or owed by the company.

(3) No election may be made under paragraph (1) above as respects relevant gains or losses to which regulation 13(4) would apply if an election under regulation 14A is made as regards such losses.

Elections to treat losses deemed to accrue immediately after the end of the final accounting period as debits in respect of loan relationships

14A. —(1) In any case where—

(a) apart from this regulation, relevant losses would accrue to a company as respects regulation 6(3) assets immediately after the end of the final accounting period by virtue of regulation 13; and

(b) if relevant gains would accrue as respects such assets at that time by virtue of that regulation, such losses would exceed them,

the company may elect, by notice to the inspector within two years of the end of the final accounting period, that this regulation shall apply as respects such losses or, in a case where sub-paragraph (b) applies, such losses to the extent that they exceed the relevant gains.

• An election under this paragraph shall be irrevocable.

(2) Where an election is made under paragraph (1) above, an amount equal to the amount of the losses to which this regulation applies shall be treated for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as a debit in respect of a loan relationship of the company for the new accounting period and not falling to be brought into account under section 82(2) of that Act.

Treatment of losses available to be carried forward at the end of the final accounting period as a result of an election made under regulation 14(5) or 16(1)

14B. —(1) This regulation apples where, as a result of an election made under regulation 14(5) or 16(1) of these Regulations, an amount of available losses (“the relevant amount”) was available at the end of the final accounting period to be carried forward and, apart from this regulation, to be set against a company’s exchange gains.

(2) Where this regulation applies an amount equal to the relevant amount shall be treated for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as a debit in respect of a loan relationship of the company for the new accounting period and not falling to be brought into account under section 82(2) of that Act. ” .

Omission of regulations 15 and 16

10. Omit regulations 15 and 16( 9 ).

Omission of Part 4

11. Omit the whole of Part 4( 10 ).

PART 3 Saving of the Exchange Gains and Losses (Alternative Method of Calculation) Regulations 1994 with modifications

Introduction

12.The Exchange Gains and Losses (Alternative Method of Calculation) Regulations 1994( 11 ) are modified in accordance with regulations 13 to 17 below and, as modified, continue to have effect (notwithstanding the repeal of sections 164(14) and 167(1) and (4) to (6) of, and Schedule 15 to, the Finance Act 1993 by sections 79(1)(b) and 141 of, and Part 3(10) of Schedule 40 to, the Finance Act 2002).

Omission of regulations 2 and 3

13. Omit regulations 2 and 3( 12 ).

Modification of regulation 7

14. —(1) Modify regulation 7 as follows.

(2) In paragraph (1) for the words from “Subject to” to “by a company at any time” substitute “Paragraphs (3) to (5) below apply in any case where a disposal of an asset is deemed by virtue of paragraph (1A) below to have been made by a company immediately before the first day of its first accounting period to begin on or after 1st October 2002”.

(3) After paragraph (1) insert—

“ 1A) For the purposes of paragraph (1) above, any asset held by the company at the beginning of the first day of its first accounting period to begin on or after 1st October 2002 shall be deemed to have been disposed of by the company immediately before that first day. ” .

(4) Omit paragraph (2).

(5) Omit paragraphs (6) to (8).

Omission of regulations 8 and 9

15. Omit regulations 8 and 9.

Modification of regulation 11

16. In regulation 11( 13 ) after paragraph (1) insert—

“ (1A) Notwithstanding the following provisions of this regulation, an election made under regulation 10 or this regulation—

(a) shall have effect only in relation to accounting periods beginning before 1st October 2002, and

(b) an election which specifies a day as the day from which the election is to have effect must specify a day that falls within an accounting period beginning before 1st October 2002. ” .

Omission of regulation 12

17. Omit regulation 12.

PART 4 Saving of the Exchange Gains and Losses (Insurance Companies) Regulations 1994 with modifications

Introduction

18.The Exchange Gains and Losses (Insurance Companies) Regulations 1994( 14 ) are modified in accordance with regulations 19 to 27 below and, as modified, continue to have effect (notwithstanding the repeal of sections 167(1) and 168(2) to (5) of the Finance Act 1993 by sections 79(1)(b) and 141 of, and Part 3(10) of Schedule 40 to, the Finance Act 2002).

Modification of regulation 1

19. In regulation 1( 15 ) after the definition of “basic valuation” insert—

• “ “the final accounting period”, in relation to a company, means the company’s accounting period preceding the first accounting period to begin on or after 1st October 2002; ” .

Omission of regulations 2 to 5A

20. Omit regulations 2 to 5A( 16 ).

Modification of regulation 7

21. In regulation 7( 17 ) for paragraph (1) substitute—

“ (1) An asset specified by this regulation is referred to in regulations 7A and 8 to 12 as a “regulation 7 asset.” ”

Insertion of regulations 7A and 7B

22. After regulation 7 insert—

“ 7A. —(1) An asset shall be deemed to have been disposed of by an insurance company immediately before its first accounting period to begin on or after 1st October 2002 where—

(a) the asset was a regulation 7 asset at the time of its deemed disposal, and

(b) at that time, the insurance company had made no election under regulation 8A of these Regulations.

(2) Subject to regulation 7B, any chargeable gain or allowable loss accruing on the deemed disposal under paragraph (1) above of an asset shall be brought into account as if it had accrued immediately after the end of the final accounting period.

7B. In any case where, apart from this regulation, chargeable gains or allowable losses would accrue to an insurance company immediately after the end of the final accounting period by virtue of regulation 7A—

(a) the insurance company may elect, by notice to the inspector within two years of the end of the final accounting period, that this regulation shall apply as respects all such gains or losses, and

(b) where such an election is made, every such gain or loss to which this regulation applies shall be treated as accruing only when the asset or liability to which the gain or loss relates ceases to be held or owed by the insurance company. ” .

Modification of regulation 8

23. In regulation 8(1)( 18 )—

(a) for “disposal of a regulation 7 asset” substitute “the deemed disposal under regulation 7A(1) of an asset”;

(b) for “8A” substitute “9”.

Omission of regulation 8A

24. Omit regulation 8A( 19 ).

Modification of regulation 9

25. In regulation 9(2) for “disposal of the asset” substitute “deemed disposal under regulation 7A(1) of the asset”.

Modification of regulation 11

26. In regulation 11(2) for “disposal of the asset” substitute “deemed disposal under regulation 7A(1) of the asset”.

Modification of regulation 12

27. In regulation 12(2) for “disposal of the asset” substitute “deemed disposal under regulation 7A(1) of the asset”.

PART 5 Saving of the Exchange Gains and Losses (Miscellaneous Modifications) Regulations 2000 with modifications

Introduction

28.The Exchange Gains and Losses (Miscellaneous Modifications) Regulations 2000( 20 ) are modified in accordance with regulations 29 and 30 below and, as modified, continue to have effect (notwithstanding the repeal of sections 164(14), 167(1) and (4) to (6) of, and Schedules 15 and 16 to, the Finance Act 1993 by sections 79(1)(b) and 141 of, and Part 3(10) of Schedule 40 to, the Finance Act 2002).

Omission of regulations 2 to 5

29. Omit regulations 2 to 5.

Omission of regulation 11

30. Omit regulation 11.