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HMRC internal manual

General Insurance Manual

Technical provisions: background: exchange gains and losses

Debits and credits calculated under the loan relationships provisions include foreign exchange gains and losses: FA96/S84A introduced by FA02. This approach applies to periods beginning on or after 1 January 2005, or for earlier periods in the case of companies which are required or choose to prepare accounts under IFRS. FA96/S100 (11) extends, for loan relationships purposes, the definition of money debt to provisions against future payments and UPP for insurance businesses. See CFM9201+, and in particular CFM9205.

A provision for claims outstanding was regarded as a qualifying liability for the purposes of the Forex rules in Chapter 2 Part 2 FA 1993 for periods beginning before 1 October 2002 (FA93/S153 (2)(b) and FA93/S153 (7)). Exchange gains and losses arising as a result of translation of the provision as disclosed in the accounts of the company fell to be taken into account as trading receipts or expenses.