The Exchange Gains and Losses (Transitional Provisions) Regulations 1994

Replacement loans

22.—(1) In any case where—

(a) a debt to which this Part applies otherwise than by virtue of this regulation (“the original debt”) is settled before final settlement of the debt is due, and

(b) the company owing the original debt incurs another debt (“the new debt”) not earlier than 30 days before the day on which the original debt is settled and not later than 30 days after that day,

then, subject to paragraphs (3) to (7) below, regulations 18 to 21 shall continue to apply in relation to the new debt as if it were the original debt (disregarding regulation 17(1)(b)) except that regulation 21 shall not apply in relation to any debt as respects which paragraph (5) below applies.

(2) Any reference in this regulation to the settlement amount is a reference to the amount of the settlement referred to in paragraph (1)(a) above.

(3) For the purposes of this regulation—

(a) any debt due for goods or services supplied to or by the company in the course of its trade shall be disregarded for the purposes of paragraph (1)(a) and (b) above;

(b) a debt shall be disregarded for the purposes of paragraph (1)(b) above unless—

(i) it is held or owed for the purposes of a trade or part of a trade and is in a currency other than the local currency of the trade or part; or

(ii) it is not held for the purposes of a trade or part of a trade and is in a currency other than sterling;

(whether or not it is the same as the currency of the original debt);

and paragraph (1) above shall not apply in relation to any person who is party to the agreement under which the new debt is incurred if he was not party to the agreement under which the original debt was incurred.

(4) In any case where the settlement amount exceeds the amount of the new debt at the time it is incurred, then, for the purposes of computing the amount of any post— commencement net exchange gain or loss and the overall exchange gain or loss for the new debt, the amount of any initial exchange gain or loss and any exchange difference which has accrued as respects the original debt shall be proportionately reduced.

(5) In any case where the amount of the new debt, at the time it is incurred, exceeds the settlement amount, then for any accrual period for the new debt—

(a) there shall be found the amount of any initial exchange gain or loss which would have accrued as respects the new debt in accordance with this Part if the amount of the new debt at the time it was incurred had been equal to the settlement amount;

(b) there shall be found the amount of any initial exchange gain or loss which would have accrued as respects the new debt in accordance with Chapter II—

(i) if regulations 18 to 21 did not apply, and

(ii) the amount of the new debt at the time it was incurred had been equal to the amount by which it exceeds the settlement amount;

(c) the amounts found in accordance with sub-paragraphs (a) and (b) above shall be aggregated and the aggregate amount so found—

(i) if positive shall be the initial exchange gain accruing to the company as respects the new debt for the accrual period in question, and

(ii) if negative shall be the initial exchange loss accruing to the company as respects the new debt for the accrual period in question;

and any initial exchange gain or loss which would apart from this paragraph so accrue shall be deemed not to accrue.

(6) In any case where the amount of the new debt, at the time it is incurred, exceeds the settlement amount, then—

(a) if that debt is partly repaid at any time, the repayment shall be taken into account so as to reduce the amount of the debt first for the purposes of paragraph (5)(b) above and only secondly for the purposes of paragraph (5)(a) above, and

(b) if that debt is increased at any time, the increase shall be taken into account so as to increase the amount of the debt for the purposes of paragraph (5)(b) above unless the debt has been reduced to an amount less than the settlement amount in which case—

(i) the increase shall first increase the amount of the debt for the purposes of paragraph (5)(a) above, but not so as to increase the debt for those purposes beyond the settlement amount, and

(ii) if the increase exceeds the amount by which the debt was less than the settlement amount, the amount of that excess shall increase the amount of the debt for the purposes of paragraph (5)(b).

(7) For the purposes of paragraph (8) below “the relevant time” means the time when the terms of the original debt required it to be repaid.

(8) Regulations 18 to 21, and paragraphs (4) to (6) above, shall not apply to the new debt in relation to any time after the relevant time and accordingly, if the new debt has not been wholly repaid by the relevant time, then—

(a) for the purposes of this Part, and of Chapter II as it applies for the purposes of any calculation required to be made in accordance with any provision of this Part, the company shall be deemed to cease to be entitled or subject to the debt at the relevant time, and

(b) for the purposes of Chapter II as it applies otherwise than in accordance with sub-paragraph (a) above, the company shall be deemed to become entitled or subject to the new debt at the relevant time, to the extent that the new debt has not been repaid at that time.

(9) This regulation shall also apply, subject to any necessary modifications—

(a) where part only of the original debt is settled before final settlement of that part is due, and not earlier than 30 days before the day it is settled and not later than 30 days after that day the company owing that debt incurs another debt (so that where this paragraph applies, this Part shall continue to apply to the old debt and to the new debt); and

(b) where a debt to which this Part applies by virtue of this regulation is settled (in whole or in part), and not earlier than 30 days before the day on which it is settled and not later than 30 days after that day the company owing that debt incurs another debt.