Finance Act 2002 SCHEDULE 23 — Exchange gains and losses from loan relationships etc

Introductory

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Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) (loan relationships) is amended in accordance with the following provisions of this Part.

Meaning of “related transaction”

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Exchange gains and losses from loan relationships etc

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Authorised accounting methods

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Convertible securities etc: exchange gains and losses

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Extension of section 100 to exchange gains and losses and to items other than money debts

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Interpretation

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Bad debt etc: cases where departure allowed from assumption of prompt payment in full

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Bad debts etc where parties have a connection

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Transactions not at arm’s length

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Exchange gains and losses where loan not on arm’s length terms

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Continuity of treatment: groups etc

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Loan relationships for unallowable purposes

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Life assurance business

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Special provisions for insurers: apportionments

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Savings and transitional provisions in the Finance Act 1996

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In Schedule 15 (savings and transitional provisions) omit paragraphs 22 to 24.

Charges on income

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Supplementary charge in respect of ring fence trades

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Double taxation relief

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(1) Section 798B of the Taxes Act 1988 (adjustments of interest and dividends for spared tax etc) is amended as follows. (2) In subsection (5) (meaning of “qualifying losses”) for paragraph (a) (exchange losses under Finance Act 1993) substitute— (a) exchange losses falling to be brought into account as debits for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships); and

Provision not at arm’s length: foreign exchange gains and losses

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Miscellaneous amendments

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(1) The Finance Act 1995 (c. 4) is amended as follows. (2) Omit section 131(which made transitional provision in relation to exchange gains and losses and which is spent). (3) In Part 2 of Schedule 24 (amendments of certain enactments) in paragraph 7 (commencement on day appointed under section 165(7)(b) of Finance Act 1993) for the words following “come into force on” substitute “ 23rd March 1995 ” .

Tonnage tax

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(1) Schedule 22 to the Finance Act 2000 (c. 17) is amended as follows. (2) In paragraph 50 (relevant shipping income: certain interests etc) in sub-paragraph (2) (income to which paragraph 50 applies) at the end of paragraph (a) insert “ and ” . (3) In paragraph 63 (meaning of “finance costs”) in sub-paragraph (2)(c) (exchange gain or loss) for “within the meaning of Chapter II of Part II of the Finance Act 1993” substitute “ within the meaning given by section 103(1A) of the Finance Act 1996 ” .

Intangible fixed assets: assets entirely excluded: financial assets

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(1) Schedule 29 to the Finance Act 2002 (gains and losses of a company from intangible fixed assets) is amended as follows. (2) In paragraph 75 (assets entirely excluded: financial assets) in sub-paragraph (3) for paragraph (a) (money debts) substitute— (a) loan relationships;

Anti-avoidance: change of accounting period

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Deferred foreign exchange gains

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(1) The repeal of sections 139 to 143 of the Finance Act 1993 (c. 34) (foreign exchange gains and losses) does not prevent the making of a claim under section 139 of that Act (deferral of unrealised gains) by a company in respect of a gain accruing in an accrual period which begins with, or at any time in, the last accounting period of the company which begins before 1st October 2002; but any such claim shall have effect subject to the following provisions of this paragraph and (subject to regulations under section 81) regulations under Chapter 2 of Part 2 of that Act. (2) Amounts which, but for the repeal of subsections (4) to (10) of section 140 of the Finance Act 1993, would fall to be treated by virtue of those subsections as exchange gains for an accrual period which consists of, or falls in, an accounting period beginning on or after 1st October 2002— (a) shall be brought into account for that accounting period as if they were credits falling for the purposes of Part 5 of the Corporation Tax Act 2009 to be brought into account in respect of the company’s loan relationships; (b) shall be treated for the purposes of that Part as non-trading credits, to the extent that they would, but for the repeal of subsections (5), (8) and (9) of section 140 of the Finance Act 1993, have fallen to be treated by virtue of those subsections as non-trading exchange gains; and (c) except as provided by paragraph (b), shall be brought into account under section 297(2) of the Corporation Tax Act 2009 (trading credits). (3) Before the expiration of the period of 2 years following the end of its first accounting period beginning on or after 1st October 2002, a company may elect for any amounts that would otherwise fall to be brought into account for that accounting period in accordance with paragraph (a) of sub-paragraph (2) instead to be brought into account in accordance with that sub-paragraph, but— (a) over the first 6 accounting periods of the company which begin on or after 1st October 2002; and (b) in instalments of an equal amount for each such accounting period. (4) If a company— (a) makes an election under sub-paragraph (3), but (b) ceases to be within the charge to corporation tax before six accounting periods of the company which begin on or after 1st October 2002 have elapsed, any instalment under that sub-paragraph which does not fall to be brought into account for an earlier accounting period shall be brought into account for the accounting period in which the company ceases to be within the charge to corporation tax. (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .