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HMRC internal manual

Corporate Finance Manual

Foreign exchange: matching: bringing amounts back into account: disposals of loan assets

Regulation 13 - disposals of creditor loan relationships

Regulation 13 differs from the rest of the EGLBAGL Regulations in providing for the ‘bringing back into account’ of exchange gains or losses that have arisen in respect of an asset, rather than in respect of a liability or derivative contract. Notwithstanding the heading of the regulation (‘Cases where matched assets represent loan relationships’), it applies in any case where exchange gains or losses on a loan relationship asset have been taken to reserves, whether or not the asset was matched. CFM61140 explains that, where a loan forms part of a long-term investment in a subsididary, exchange differences may be accounted for in this way.

A net gain is brought back into account as a loan relationship credit in the accounting period in which there is a disposal of the loan relationship asset. Similarly, a net loss is brought back into account as a loan relationship debit. A disposal (or part disposal) will occur if the loan is wholly or partly repaid, or it is transferred to a new creditor. This includes intra-group transfers that are treated as being at notional carrying value by CTA09/S340 - regulation 13 has no special rule for no gain/no loss disposals.

Broadly, the credit or debit is the aggregate of exchange differences on the asset that have been taken to reserves. This will comprise

  • exchange differences arising in accounting periods beginning on or after 1 October 2002 but before 1 January 2005, that were taken to reserves and disregarded under FA96/S84A(4) (as that subsection stood at the relevant time); plus
  • exchange differences taken to the STRGL (statement of total recognised gains and losses) or statement of changes in equity in periods beginning on or after 1 January 2005.

If the loan was in place in periods beginning before 1 October 2002, exchange differences taken to reserves in these periods are not included.