The Exchange Gains and Losses (Insurance Companies) Regulations 1994

Explanatory Note

(This note is not part of the Order)

These Regulations, which come into force on 23rd March 1995, modify the provisions relating to exchange gains and losses contained in Chapter II of Part II of the Finance Act 1993 in their application to assets and liabilities held or owed by insurance companies.

Regulation 1 provides for citation, commencement and interpretation.

Regulation 2 provides that, for the purposes of applying the provisions of Chapter II to assets and liabilities held or owed by insurance companies, unearned premium reserves and certain provisions included in accounts prepared for tax purposes are to be treated as if they were provisions within section 153(2)(b) of the Finance Act 1993.

Regulation 3 provides that exchange gains or losses which would otherwise accrue under Chapter II on qualifying assets which are shares held by an insurance company are to be disregarded for the purposes of that Chapter, and ensures that exchange gains or losses on such qualifying assets may be taken into account in computing profits otherwise than in accordance with Chapter II.

Regulation 4 applies to exchange gains or losses which are reduced or extinguished for the purposes of Chapter II under the Exchange Gains and Losses (Alternative Method of Calculation) Regulations 1994 (S. I. 1994/3227) because the asset or liability is held or owed in exempt circumstances which includes the holding of assets for the purposes of long term or mutual insurance business). It enables such exchange gains and losses to be taken into account in computing profits otherwise than in accordance with Chapter II.

Regulation 5 applies where the transaction in pursuance of which the company became unconditionally entitled or subject to an asset or liability on any date is recorded in the accounting records on a later date. For the purposes of Chapter II, the company is deemed to become unconditionally entitled or subject to the asset or liability on the date the transaction is recorded in the accounting records, and not on the earlier date.

Regulation 6 ensures that in the case of a company carrying on life insurance business, relief for non-trading exchange losses cannot be set against that part of the profits of the life insurance business which accrues for the benefit of the company’s policy holders.