The Exchange Gains and Losses (Alternative Method of Calculation of Gain or Loss) Regulations 1994

Assets etc. held in exempt circumstances

Reduction in exchange gains and losses

2.—(1) This regulation applies in any case where an asset, liability or contract is held or owed during the whole or part of an accrual period “the current period”) by a company wholly or partly in exempt circumstances.

(2) In any case where this regulation applies, the amount of the initial exchange gain or initial exchange loss which, apart from this regulation, would accrue to the company as respects that asset, liability or contract for the current period shall be found in accordance with the alternative method of calculation but subject to paragraph (5) below.

(3) The accrued amount for each day in that period during which the asset, contract or liability is wholly held or owed in exempt circumstances shall be reduced to nil.

(4) In any case where during an accrual period an asset, contract or liability is held or owed—

(a) partly for the purposes of long term insurance business, mutual insurance business or the occupation of commercial woodlands, and

(b) partly for other purposes (not also being exempt),

the accrued amount for each day in that period shall be correspondingly apportioned between the different purposes, and the amount so apportioned to the purposes of long term insurance business, mutual insurance business or the occupation of commercial woodlands (as the case may be) shall be reduced to nil.

(5) In any case where—

(a) at any time during the current period there is a major change in the extent to which the asset, contract or liability is held or owed, or is not held or owed, in exempt circumstances, and

(b) there is a significant change in the rate of exchange relevant to the computation of the accrued amounts during that period, and

(c) that time is not (disregarding this regulation) a translation time as respects the asset, liability or contract,

then the initial exchange gain or loss as respects the asset, contract or liability for the current period shall be calculated as if that time were a translation time, (but not so as to create more than one accrual period), so that separate calculations are made for different parts of the period and paragraphs (3) and (4) above (if applicable) are applied separately in relation to each such part.

(6) This regulation does not apply in relation to any gain which is treated as a non— trading exchange gain by virtue of section 140(9) of the 1993 Act.