The Exchange Gains and Losses (Transitional Provisions) (Amendment) Regulations 1996

Explanatory Note

(This note is not part of the Regulations)

These Regulations amend the Exchange Gains and Losses (Transitional Provisions) Regulations 1994 (S.I. 199413226) (“the principal Regulations”). Regulations 3,5 to 7, and 9 make amendments which reflect the provisions of the Finance Act 1996 for taxing and relieving profits or losses on loan relationships with effect from 1st April 1996. Regulations 4 and 8 amend provisions of the principal Regulations for the making of elections.

Regulation 1 provides for citation and commencement, and regulation 2 for interpretation.

Regulation 3 inserts a definition of “discounted debt” in regulation l(3) of the principal Regulations (interpretation).

Regulation 4 extends the time limit for making an election under regulation 6(2) of the principal Regulations (basic valuation of an asset or liability) to 30th September 1996, and provides that an election may be withdrawn before that date.

Regulation 5 disapplies as from 31st March 1996 regulation 10 of the principal Regulations (“cumulative gain and cumulative loss”) in cases where an existing asset held or liability owed by a company consists of a discounted debt.

Regulation 6 amends regulation 13 of the principal Regulations as a consequence of the amendment made by regulation 7.

Regulation 7 amends regulation 14 of the principal Regulations by omitting certain provisions of that regulation in relation to disposals of existing chargeable assets on or after 1st April 1996.

Regulation 8 makes a similar provision to that made by regulation 4 in relation to an election under regulation 15 of the principal Regulations re-commencement day gains and losses), and also provides that where a company makes an election under both regulation 6(2) and regulation 15 of the principal Regulations in relation to an existing asset, loss relief in respect of the asset is not available for accounting periods ending after the coming into force of these Regulations.

Regulation 9 amends regulation 18 of the principal Regulations in similar manner to the amendment made to regulation 10 of the principal Regulations by regulation 5 of these Regulations.

Authority for the retrospective effect of regulations 5,7 and 9 is given by section 167(5B) of the Finance Act 1993 (inserted by paragraph 74 of Schedule 14 to the Finance Act 1996).