Finance Act 2002

Convertible securities etc: exchange gains and losses U.K.

5 (1) Section 92 (convertible securities etc: creditor relationships) is amended as follows.

(2) In subsection (2) (which, in the case of securities to which the section applies, confines the amounts to be brought into account under the Chapter to interest) after “confined to” insert “ (a) ” and at the end of the subsection add “; and

(b) amounts relating to exchange gains or losses”.

(3) After subsection (5) (consideration for purposes of Taxation of Chargeable Gains Act 1992 (c. 12) to be adjusted by excluding certain amounts relating to interest brought into account under subsections (2) and (3)) insert—

“(5A) For the purposes of that Act the amount or value of the consideration for any disposal of the asset—

(a) shall be increased by the addition of any relevant exchange losses, determined in accordance with subsection (5C) below; and

(b) shall (after giving effect to any such increase) be reduced (but not below nil) by the deduction of any relevant exchange gains, determined in accordance with that subsection.

(5B) In subsection (5C) below—

• “relevant accounting period” means any accounting period beginning on or after 1st October 2002; and

• “the relevant condition” is that the asset in question is an asset to which this section applies and is held by the company making the disposal.

(5C) For the purposes of subsection (5A) above, relevant exchange gains or, as the case may be, losses in the case of any asset are—

(a) the amount of any exchange gains or, as the case may be, losses brought into account under subsections (2) and (3) above in respect of the asset, by the company making the disposal, for a relevant accounting period throughout which the relevant condition is satisfied; and

(b) for any relevant accounting period not falling within paragraph (a) above in which the relevant condition is at some time satisfied, an amount which, on a just and reasonable apportionment, represents so much of the amount of any exchange gains or, as the case may be, losses brought into account under subsections (2) and (3) above in respect of the asset, by the company making the disposal, for that period as is referable to the part of the period for which the relevant condition is satisfied.

(5D) Where—

(a) the amount of the relevant exchange gains falling to be deducted under subsection (5A)(b) above, exceeds

(b) the amount required to reduce the amount or value of the consideration to nil,

the excess shall be treated for the purposes of section 38(1)(c) of the Taxation of Chargeable Gains Act 1992 as incidental costs of making the disposal of the asset.”.

(4) In subsection (6)—

(a) in the opening words (construction of references to disposal in subsection (5)) for “subsection (5)” substitute “ subsections (5) and (5A) ”; and

(b) in paragraph (b)(disposals within the meaning of the Taxation of Chargeable Gains Act 1992 but for section 127 or 116(10)) omit “127 or”.

(5) In subsection (9) (which, subject to subsection (10), gives the meaning of “the relevant consideration”) for “subsection (10)” substitute “ subsections (10) and (10A) ”.

(6) After subsection (10) (which disapplies subsection (5) in the case of a deemed disposal and re-acquisition under subsection (7) but makes corresponding provision) insert—

“(10A) Subsection (5A) above shall not apply in the case of a deemed disposal and re-acquisition under subsection (7) above; but in any such case the amount of the relevant consideration, after any reduction under subsection (10) above, shall be treated for the purposes of the Taxation of Chargeable Gains Act 1992 as further adjusted by making the same additions and deductions (and for the purposes of both the disposal and the re-acquisition) as would fall to be made under subsection (5A) above if it were the consideration for an actual disposal and that subsection also applied in relation to the corresponding acquisition.”.