The Local Currency Elections Regulations 1994

Explanatory Note

(This note is not part of the Regulations)

These Regulations, which come into force on 23rd March 1995, make provision for the basic profits or losses of a trade or part trade to be computed and expressed for corporation tax purposes in a currency other than sterling where a company so elects and where certain conditions are satisfied.

Regulation 1 provides for citation and commencement, and regulation 2 contains definitions.

Regulation 3 permits a company to elect to have the basic profits and losses of a trade computed and expressed for corporation tax purposes in a currency other than sterling. Regulation 4 contains corresponding provisions for the basic profits and losses of different parts of a trade.

Regulation 5 prescribes the conditions which must be fulfilled in order for a particular currency to be specified in an election. Regulation 6 specifies factors to be taken into account in determining whether one of these conditions — that the currency is the currency of the “primary economic environment” of the trade or part trade — is satisfied. Regulation 7 contains supplementary provisions.

Regulation 8 provides that an average exchange rate may be used for translating basic profits or losses into sterling provided that this is specified in the election.

Regulations 9 and 10 provide rules for determining the accounting periods for which an election has effect. Regulation 10 also specifies certain information to be submitted with elections, and requires the company to notify the inspector when the conditions for an election to be effective cease to be met.

The Statement of Standard Accounting Practice mentioned in regulation 5(4) (SSAP 20; ISBN No 0852915047) may be obtained from A. S. B. Publications, PO Box 939, Central Milton Keynes, MK9 2HT.