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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: amounts deferred under Reg 9

FA 1993 forex: transitional rules: amounts deferred under Regulation 9

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

Reg 9 deferred the bringing into account of exchange gains or losses on assets disposed of in a transaction to which TCGA92/S116 or TCGA92/S127 applied.

The amount that would have been brought into account in the absence of Reg 9 was calculated and deferred until a disposal of the new holding. On the subsequent disposal of the new holding a deferred gain would be added to the consideration received. A deferred loss would be deducted from the consideration received.

A transitional issue arises if the subsequent disposal has not taken place by the first day of the accounting period to begin on or after 1 October 2002.

Reg 3 of the 2002 Regulations prescribes when amounts should be brought into account under Reg 4(1), SI2002/1970. It includes, at Reg 3(3)(c), the disposal of an asset on which there has been

  • a deferred gain or loss under Reg 9 of the 1994 Matching Regulations, and
  • an amount has not been brought into account subsequently.

Where there has been a share-for-share exchange to which TCGA92/S127 applied, the normal TCGA 1992 rules will apply on any subsequent disposal of the ‘new holding’ of shares, except that the disposal consideration will have been increased by the aggregate amount of exchange gains previously disregarded under the FA 1993 forex matching rules, or increased by the aggregate amount of exchange losses.

This increase or decrease is, as it were, ‘pre-programmed’ by Reg 9 of the 1994 Regulations. So it does not matter whether the share disposal takes place before or after 6 April 2010 - the tax consequences of the disposal are unaffected by the changes to the 2002 Regulations made by SI 2010/809 (CFM62670).

In a similar way, where the ‘new holding’ consists of a QCB, the normal operation of TCGA92/S116(10)(b) means that a chargeable gain or allowable loss is brought into account on disposal of the QCB. The amount of this held-over gain or loss will have been computed when the exchange of shares for the QCB took place, and Reg 9 of the 1994 Regulations will have ensured that - in making that computation - the appropriate adjustment to the disposal consideration for the shares was made. So it does not matter whether the eventual disposal of the QCB happens before or after 6 April 2010.