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HMRC internal manual

Corporate Finance Manual

Old rules: forex and accounts drawn up in a foreign currency: matching: transition from FA 1993 regime: deemed disposal on transition

FA 1993 forex: transitional rules: deemed disposal on transition

This guidance applies for accounting periods between 1 October 2002 and 1 January 2005

This applies to a company if it had a matching election in place at any time that the FOREX regime was in force.

The new loan relationship and derivative contract rules generally apply from the first accounting period to begin on or after 1 October 2002.

On the last day of the previous accounting period the company must make calculations as if a disposal of the matched assets had taken place on that day. This also includes partially matched assets. The aim is to make calculation easier when an actual disposal takes place in a later year. The amount is not brought into charge in the last FOREX accounting period. Instead, it is held over until there is an actual disposal of the asset. When this occurs it is brought into charge under Reg 4(1), SI2002/1970 as a chargeable gain or allowable loss.

The exception is if the liability was matched to a ship or aircraft under the elective matching regime. In this case, the held over amount will be brought in under Reg 6 as a loan relationships credit or debit when there is a disposal of the ship or aircraft.

SI2002/1970 was amended by SI2010/809, so that on a disposal of matched shares on or after 6 April 2010, amounts are brought back into account by adjusting the disposal consideration for the shares, rather than as a free-standing chargeable gain or allowable loss (see CFM62270). The change does not, however, apply to ‘transitional’ amounts that have been held over. On disposal of the asset, they are brought back into account in accordance with the ‘old’ version of Reg 4 (CFM62300).