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HMRC internal manual

General Insurance Manual

Technical provisions: periods of account beginning on or after 1 January 2000 and ending before 19 July 2007: General Insurance Reserves (Tax) Regulations: currency accounting: periods ending before 5 December 2003

Regulation 5: accounting in foreign currencies before 5 December 2003

Rule 1 of regulation 3 required the calculations to be carried out in sterling, subject to Regulation 5, which dealt with accounting in foreign currencies.

This regulation was substantially changed as part of the 2003 amendments and again in 2005.

In its original format, regulation 5 allowed the insurer to make an election that the calculations should be carried out in a currency other than sterling and a foreign currency discount rate should be applied in Rule 5.

Such an election could be made where the liabilities were denominated in US dollars, Canadian dollars, Australian dollars, Euro, Swiss francs or Japanese yen (known as ‘relevant currencies’), or where the accounting currency was one of those currencies. Where an election was made, the regulation 3 calculation would be carried out in that currency. There were thus two kinds of election, one for liabilities denominated in that currency, and one for the liabilities from that part of the business for which the foreign currency was the accounting currency. It was not permitted for an insurer to make both types of election for the same period of account.

The election determined how the liabilities for that period of account were to be recalculated in all later periods, but it did not require the company to make the same election in successive years. The time limits for the election were the same as for FA00/S107 (4) elections.