Finance Act 2002

Section 79

SCHEDULE 23 U.K. Exchange gains and losses from loan relationships etc

Part 1 U.K. Amendments of the Finance Act 1996

Introductory U.K.

1 Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) (loan relationships) is amended in accordance with the following provisions of this Part.

Meaning of “related transaction” U.K.

2 (1) Section 84 (debits and credits brought into account) is amended as follows.

(2) In subsection (5) (meaning of “related transaction” in the section) for “In this section” substitute “ In this Chapter ”.

(3) In subsection (6) (disposals and acquisitions for the purposes of the section) for “for the purposes of this section” substitute “ for the purposes of subsection (5) above ”.

Exchange gains and losses from loan relationships etc U.K.

F1 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 23 para. 3 repealed (with effect in accordance with Sch. 11 Pt. 2(6) Note 3 of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 11 Pt. 2(6)

Authorised accounting methods U.K.

F2 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 23 para. 4 repealed (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(6)

Convertible securities etc: exchange gains and losses U.K.

F3 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 Sch. 23 para. 5 repealed (with effect in accordance with s. 52(3), Sch. 10 para. 9(2)(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(6)

Extension of section 100 to exchange gains and losses and to items other than money debts U.K.

6 For section 100 (interest on judgments, imputed interest, etc) substitute—

“100 Interest, and exchange gains and losses, on debts etc not arising from the lending of money

(1) For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—

(a) the company stands, or has stood, in the position of a creditor or debtor as respects a money debt;

(b) the money debt is not one which arose from a transaction for the lending of money (so that, in consequence of section 81(1)(b) above, there is no loan relationship); and

(c) the money debt is one—

(i) on which interest is payable to or by the company; or

(ii) in relation to which exchange gains or losses arise to the company;

and references to a relationship to which this section applies, and to a company’s being party to such a relationship, shall be construed accordingly.

(2) Where a company has a relationship to which this section applies—

(a) this Chapter shall have effect in relation to the interest payable under, or the exchange gains or losses arising to the company from, the relationship as it has effect in relation to interest payable under, or (as the case may be) exchange gains or losses arising to the company from, a loan relationship to which the company is a party; but

(b) the only credits or debits to be brought into account for the purposes of this Chapter in respect of the relationship are those relating to the interest or (as the case may be) to the exchange gains or losses;

and, subject to paragraph above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.

(3) References in this section to interest payable on a money debt include a reference to any amount which, in pursuance of Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length), falls to be treated as—

(a) interest on a money debt; or

(b) interest on an amount which is treated as a money debt;

and references in the other provisions of this section to a money debt accordingly include a reference to the amount on which that amount so falls to be treated as interest.

(4) Except as provided by subsection (7) below, any question whether debits or credits falling to be brought into account by virtue of this section in relation to a company—

(a) are to be brought into account under section 82(2) above, or

(b) are to be treated as non-trading debits or non-trading credits,

shall be determined in accordance with subsection (5) below (in the case of interest) or subsection (6) below (in the case of an exchange gain or loss).

(5) In the case of interest, any such question shall be determined according to the extent (if any) to which the interest—

(a) is paid for the purposes of a trade carried on by the company;

(b) is received in the course of activities forming an integral part of such a trade; or

(c) in the case of deemed interest, would be deemed to be so paid or received.

(6) In the case of an exchange gain or loss, any such question shall be determined according to the extent (if any) to which the money debt—

(a) is owed by the company for the purposes of a trade carried on by the company; or

(b) is held in the course of activities forming an integral part of such a trade.

(7) Any debits or credits which—

(a) relate to interest payable under the Tax Acts, and

(b) fall to be brought into account by virtue of this section in relation to any company,

are to be treated as non-trading debits or credits.

(8) To the extent that debits or credits fall to be brought into account by a company under section 82(2) above in the case of a relationship to which this section applies, the company shall be regarded for the purposes of the Corporation Tax Acts as being party to the relationship for the purposes of a trade carried on by the company.

(9) No exchange gains or losses shall be taken to arise for the purposes of this section if the money debt in question—

(a) is an amount of tax,

(b) is an amount of tax payable under the law of a territory outside the United Kingdom, or

(c) is an amount which would, but for any statutory provision or rule of law to the contrary other than section 74(1)(f) or (g) of the Taxes Act 1988, be deductible as an expense in computing profits in accordance with Case I of Schedule D or as an expense of management within section 75 of the Taxes Act 1988,

except to the extent that, in the case of a money debt falling within paragraph (b) above, a reduction in respect of the tax there mentioned falls to be made under section 811 of the Taxes Act 1988 (double taxation relief: deduction for foreign tax where no credit allowable).

(10) For the purposes of this section so far as relating to exchange gains and losses, each of the following shall be treated as a money debt owed to a company—

(a) any currency held by the company;

(b) in the case of a company carrying on insurance business, any deferred acquisition costs, within the meaning of Assets item G.II in the Balance Sheet Format set out after paragraph 9 of Schedule 9A to the Companies Act 1985 (form and content of accounts of insurance companies and groups) as read with note (17) of the Notes on the Balance Sheet Format (which follow immediately after that format).

(11) For the purposes of this section so far as relating to exchange gains and losses, each of the following shall be treated as a money debt owed by a company—

(a) any provision made by the company for the purposes of its statutory accounts in respect of a liability to which the company may become subject;

(b) in the case of a company carrying on insurance business—

(i) any provision made by the company for unearned premiums, within the meaning of Liabilities item C.1 in the Balance Sheet Format set out after paragraph 9 of Schedule 9A to the Companies Act 1985, as read with note (20) of the Notes on the Balance Sheet Format (which follow immediately after that format);

(ii) any provision for unexpired risks, as defined in paragraph 81(1) of that Schedule.

(12) A provision does not fall within paragraph (a) of subsection (11) above unless—

(a) the duty to settle the liability in question would (if the company were to become subject to it) be owed for the purposes of a trade, a Schedule A business or an overseas property business (within the meaning of section 70A of the Taxes Act 1988); and

(b) the provision falls to be taken into account (apart from this Chapter) in computing the profits or losses of the trade, Schedule A business or overseas property business for corporation tax purposes.

(13) This section has effect subject to the provisions of Schedules 9 and 11 to this Act.”.

Interpretation U.K.

7 (1) Section 103 is amended as follows.

(2) In subsection (1) (definitions) insert each of the following definitions at the appropriate place—

• ““exchange gain” and “exchange loss” shall be construed in accordance with subsections (1A) and (1B) below;”;

““related transaction” shall be construed in accordance with section 84 above (see subsections (5) and (6) of that section);”.

(3) After subsection (1) insert—

“(1A) References in this Chapter to exchange gains or exchange losses, in the case of any company, are references respectively to—

(a) profits or gains, or

(b) losses,

which arise as a result of comparing at different times the expression in one currency of the whole or some part of the valuation put by the company in another currency on an asset or liability of the company.

If the result of such a comparison is that neither an exchange gain nor an exchange loss arises, then for the purposes of this Chapter an exchange gain of nil shall be taken to arise in the case of that comparison.

(1B) Any reference in this Chapter to an exchange gain or loss from a loan relationship of a company is a reference to an exchange gain or loss arising to a company in relation to an asset or liability representing a loan relationship of the company.”.

Bad debt etc: cases where departure allowed from assumption of prompt payment in full U.K.

F4 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4 Sch. 23 para. 8 repealed (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(6)

Bad debts etc where parties have a connection U.K.

9 (1) Paragraph 6 of Schedule 9 is amended as follows.

(2) In sub-paragraph (3) (assumption that debts will be paid in full to be applied as if no departure authorised by virtue of paragraph 5 except as provided by sub-paragraph (4)) for “paragraph 5” substitute “ paragraph 5(1) ”.

(3) At the end of the paragraph add—

“(8) Nothing in this paragraph affects the debits or credits to be brought into account for the purposes of this Chapter in respect of exchange gains or losses arising from a debt.”.

Transactions not at arm’s length U.K.

10 (1) Paragraph 11 of Schedule 9 is amended as follows.

(2) In sub-paragraph (1), for “Subject to sub-paragraphs (2) and (3) below,” substitute “ Subject to sub-paragraphs (2) to (3A) below, ”.

(3) After sub-paragraph (3) insert—

“(3A) Sub-paragraph (1) above shall not apply to any exchange gains or losses.”.

Exchange gains and losses where loan not on arm’s length terms U.K.

11 After paragraph 11 of Schedule 9 insert the following paragraph—

“Exchange gains and losses where loan not on arm’s length terms

11A (1) Where a company has a debtor relationship in an accounting period and in the case of that accounting period—

(a) the whole of any interest or other distribution out of the assets of the company in respect of securities of the company that represent the relationship falls by virtue of section 209(2)(da) or (e)(vii) of the Taxes Act 1988 to be regarded as a distribution for the purposes of the Corporation Tax Acts, or

(b) the profits and losses of the company fall by virtue of Schedule 28AA to that Act (provision not at arm’s length) to be computed for tax purposes as if the loan had not been made,

any exchange gains or losses which arise in that accounting period in respect of a liability representing the debtor relationship shall be left out of account in determining the debits or credits to be brought into account for the purposes of this Chapter.

(2) Where a company has a debtor relationship in an accounting period and in the case of that accounting period—

(a) part of any interest or other distribution out of the assets of the company in respect of securities of the company that represent the relationship falls by virtue of section 209(2)(da) or (e)(vii) of the Taxes Act 1988 to be regarded as a distribution for the purposes of the Corporation Tax Acts, or

(b) the profits and losses of the company fall by virtue of Schedule 28AA to that Act to be computed for tax purposes as if the loan had in part not been made,

the proportionate part of any exchange gains or losses which arise in that accounting period in respect of a liability representing the debtor relationship shall be left out of account in determining the debits or credits to be brought into account for the purposes of this Chapter.

(3) In sub-paragraph (2) above, the “proportionate part” of an exchange gain or loss is that part which bears to the whole the proportion which—

(a) in a case falling within paragraph (a) of that sub-paragraph, the part of the interest or other distribution out of assets that falls to be regarded as a distribution for the purposes of the Corporation Tax Acts bears to the whole of that interest or other distribution out of assets; or

(b) in a case falling within paragraph (b) of that sub-paragraph, the part of the loan that falls to be treated as if it had not been made bears to the whole of the loan.

(4) Where—

(a) a company has a creditor relationship in an accounting period,

(b) the transaction giving rise to the loan is such that it would not have been entered into at all if the parties had been dealing at arm’s length, and

(c) there is no corresponding debtor relationship such that there would, or would apart from section 84A(2) to (10) of this Act, fall to be brought into account for the purposes of this Chapter, in respect of exchange gains or losses from that debtor relationship, debits or (as the case may be) credits corresponding to, and of the same amount as, the credits or debits that would (apart from this paragraph) fall to be brought into account for the purposes of this Chapter in respect of exchange gains or losses from the creditor relationship,

any exchange gains or losses which arise in that accounting period in respect of an asset representing the creditor relationship shall be left out of account in determining the debits or credits to be brought into account for the purposes of this Chapter.

(5) Where—

(a) a company has a creditor relationship in an accounting period,

(b) the circumstances are such that, had the parties to the transaction giving rise to the loan been dealing at arm’s length, the terms would have been the same, except that the amount of the loan would have been an amount (referred to in sub-paragraph (6) below as “the adjusted amount”) greater than nil but less than its actual amount, and

(c) there is no such corresponding debtor relationship as satisfies, in relation to that creditor relationship, the condition set out in sub-paragraph (4)(c) above,

sub-paragraph (4) above shall not apply, but the excess portion of any exchange gain or loss which arises in the accounting period in respect of an asset representing the creditor relationship shall be left out of account in determining the debits or credits to be brought into account for the purposes of this Chapter.

(6) In sub-paragraph (5) above, the “excess portion” of an exchange gain or loss is so much of the gain or loss as remains after subtracting that part which bears to the whole the proportion which the adjusted amount bears to the amount of the loan.”.

Continuity of treatment: groups etc U.K.

12 In paragraph 12 of Schedule 9, for sub-paragraph (8) (which applies sub-paragraphs (4) and (5) of paragraph 11 of the Schedule) substitute—

“(8) Sub-paragraph (5) of paragraph 11 above has effect for the purposes of this paragraph as it has effect for the purposes of that paragraph.”.

Loan relationships for unallowable purposes U.K.

13 In paragraph 13 of Schedule 9, in sub-paragraph (1) (which disallows debits attributable to unallowable purposes)—

(a) for “the debits”, where first occurring, substitute the following paragraphs—

“(a) the debits, and

(b) the credits in respect of exchange gains,”;

and

(b) after “the debits”, where next occurring, insert “ or credits (as the case may be) ”.

Life assurance business U.K.

14 (1) Paragraph 1 of Schedule 11 is amended as follows.

(2) Before sub-paragraph (2) (effect on debits and credits of applying I minus E basis to profits and gains from loan relationships of insurance companies referable to life assurance business) insert—

“(1B) In applying the I minus E basis for any accounting period in respect of any life assurance business carried on by an insurance company, no exchange gains or losses shall be taken to arise for the purposes of section 100 of this Act except to the extent that the money debt for the purposes of that section—

(a) arises as a result of an amount of income or expenses which falls to be taken into account in applying the I minus E basis not being paid when it is due and payable; or

(b) is one that is treated as a money debt for the purposes of that section by virtue of subsection (11)(a) of that section in accordance with subsection (12) of that section by reference to a Schedule A business or an overseas property business.

This sub-paragraph has effect notwithstanding sub-paragraph (1) above.”.

Special provisions for insurers: apportionments U.K.

15 In paragraph 3A of Schedule 11 (cases where money debt of insurance company is represented by a liability of the long term business fund) in sub-paragraph (1)—

(a) in paragraph (a), for “money debt” substitute “ loan relationship ”; and

(b) in paragraph (b), omit “debt or”.

Savings and transitional provisions in the Finance Act 1996 U.K.

16 In Schedule 15 (savings and transitional provisions) omit paragraphs 22 to 24.

Part 2 U.K. Amendments of other legislation

The Income and Corporation Taxes Act 1988 U.K.

Charges on income U.K.

17 (1) Section 494 of the Taxes Act 1988 is amended in accordance with the following provisions of this paragraph.

(2) Subsection (2) (debits not to be brought into account in a manner which results in the reduction of what would otherwise be the company’s ring fence profits, except as provided in the subsequent paragraphs) is amended as follows.

(3) In paragraph (c) (debits in respect of a deemed loan relationship)—

(a) for “a loan relationship deemed to exist for the purposes of section 100 of that Act,” substitute “ a relationship to which section 100 of that Act applies, ”;

(b) after “to the extent that” insert “ (i) ”; and

(c) after “above;” insert “or

(ii) the exchange loss arising from that relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure;

as the case may be; ”.

(4) In paragraph (d) (debits in respect of debtor relationship which is creditor relationship of associated company)—

(a) for “in the case of debits” substitute “ in the case of a net debit for an accounting period ”; and

(b) for “the debit”, in both places where occurring, substitute “ the net debit ”.

(5) In the second sentence of that subsection (interpretation) for “any loan relationship deemed to exist for the purposes of section 100 of that Act” substitute “ any relationship to which section 100 of that Act applies ”.

(6) After the second sentence insert the following as a third sentence—

“For the purposes of paragraph (d) above, the net debit for an accounting period in respect of a debtor relationship of a company is the amount if any by which—

(i) the aggregate of the debits for the period in respect of the relationship, exceeds

(ii) the credits in respect of exchange gains arising from the relationship for the period.”.

(7) After subsection (2) insert—

“(2ZA) Credits in respect of exchange gains from a company’s loan relationships shall not be brought into account for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 in respect of any loan relationship of a company in any manner that results in an increase of what would otherwise be the company’s ring fence profits, except to the extent that, if the credit had been a debit in respect of an exchange loss from the relationship, it would have been brought into account by virtue of any of paragraphs (a) to (c) of subsection (2) above.”.

(8) In subsection (2A) (debits prevented from reducing ring fence profits by subsection (2) to be brought into account for purposes of Chapter 2 of Part 4 of Finance Act 1996 (c. 8) as non-trading debits)—

(a) after “Where any debit” insert “ or credit ”;

(b) in paragraph (b)—

(i) after “in accordance with subsection (2)” insert “ or (2ZA) ”; and

(ii) after “reduction” insert “ or, as the case may be, increase ”; and

(c) in the closing words—

(i) after “that debit” insert “ or credit ”; and

(ii) after “non-trading debit” insert “ or, as the case may be, non-trading credit ”.

(9) After subsection (2A) insert—

“(2B) Where, in accordance with subsection (2) above, any proportion (including the whole) of a net debit, within the meaning of paragraph (d) of that subsection, cannot be brought into account in a manner that results in any reduction of what would otherwise be the company’s ring fence profits, subsection (2A) above shall apply—

(a) separately in relation to that proportion of each of the debits and each of the credits brought into account in determining the amount of the net debit, and

(b) on the assumption that that proportion of each of those debits and credits falls within paragraph (b) of that subsection.”.

Supplementary charge in respect of ring fence trades U.K.

18 (1) In section 501A of the Taxes Act 1988, subsection (5) (computation of financing costs) is amended as follows.

(2) In paragraph (a) (costs giving rise to debits in respect of debtor relationships) after “(loan relationships)” insert “ , other than debits in respect of exchange losses from such relationships (see section 103(1A) and (1B) of that Act) ”.

(3) For paragraph (b) (exchange gain or loss, within the meaning of Chapter 2 of Part 2 of the Finance Act 1993 (c. 34), in relation to debt finance) substitute—

“(b) any exchange gain or loss from a debtor relationship, within the meaning of that Chapter (see section 103(1A) and (1B) of that Act), in relation to debt finance;”.

F5 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F5 Sch. 23 para. 19 repealed (7.4.2005) by Finance Act 2005 (c. 7), Sch. 11 Pt. 2(6)

Double taxation relief U.K.

20 (1) Section 798B of the Taxes Act 1988 (adjustments of interest and dividends for spared tax etc) is amended as follows.

(2) In subsection (5) (meaning of “qualifying losses”) for paragraph (a) (exchange losses under Finance Act 1993) substitute—

“(a) exchange losses falling to be brought into account as debits for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships); and”.

Provision not at arm’s length: foreign exchange gains and losses U.K.

21 (1) In Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length) paragraph 8 (foreign exchange gains and losses etc) is amended as follows.

(2) In sub-paragraph (1) (exceptions)—

(a) for “Subject to sub-paragraph (2)” substitute “ Subject to sub-paragraph (3) ”; and

(b) for paragraph (a) (which relates to Chapter 2 of Part 2 of the Finance Act 1993) substitute—

“(a) Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) in respect of exchange gains or losses from loan relationships (as defined in section 103(1A) and (1B) of that Act), or”.

(3) For sub-paragraph (2) (saving for certain provisions of sections 136 and 136A of the Finance Act 1993 (application of arm’s length test)) substitute—

“(3) Sub-paragraph (1) above shall not affect so much of paragraph 11A of Schedule 9 to the Finance Act 1996 (loan relationships: exchange gains or losses where loan not on arm’s length terms) as has effect by reference to whether profits or losses fall to be computed by virtue of this Schedule as if the whole or any part of a loan had not been made.”.

The Finance Act 1995 U.K.

Miscellaneous amendments U.K.

22 (1) The Finance Act 1995 (c. 4) is amended as follows.

(2) Omit section 131(which made transitional provision in relation to exchange gains and losses and which is spent).

(3) In Part 2 of Schedule 24 (amendments of certain enactments) in paragraph 7 (commencement on day appointed under section 165(7)(b) of Finance Act 1993) for the words following “come into force on” substitute “ 23rd March 1995 ”.

The Finance Act 2000 U.K.

Tonnage tax U.K.

23 (1) Schedule 22 to the Finance Act 2000 (c. 17) is amended as follows.

(2) In paragraph 50 (relevant shipping income: certain interests etc) in sub-paragraph (2) (income to which paragraph 50 applies) at the end of paragraph (a) insert “ and ”.

(3) In paragraph 63 (meaning of “finance costs”) in sub-paragraph (2)(c) (exchange gain or loss) for “within the meaning of Chapter II of Part II of the Finance Act 1993” substitute “ within the meaning given by section 103(1A) of the Finance Act 1996 ”.

The Finance Act 2002 U.K.

Intangible fixed assets: assets entirely excluded: financial assets U.K.

24 (1) Schedule 29 to the Finance Act 2002 (gains and losses of a company from intangible fixed assets) is amended as follows.

(2) In paragraph 75 (assets entirely excluded: financial assets) in sub-paragraph (3) for paragraph (a) (money debts) substitute—

“(a) loan relationships;”.

Part 3 U.K. Transitional provisions etc

Anti-avoidance: change of accounting period U.K.

25 (1) This paragraph applies where—

(a) a company changes its accounting date so that it has an accounting period which begins on or after 1st October 2001 but ends before 30th September 2002; and

(b) the change of accounting date is or was made for the purpose, or for purposes which include the purpose, specified in sub-paragraph (2).

(2) The purpose is that of securing, in the case of any subsequent accounting period beginning before 1st October 2002,—

(a) that where an amount, or a bigger amount, would have fallen to be brought into account as a credit under Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) if the other provisions of this Schedule had had effect in relation to the period, no amount, or a smaller amount, falls to be brought into account in accordance with section 128 or 130 of the Finance Act 1993 (c. 34); or

(b) that where no amount, or a smaller amount, would have fallen to be brought into account as a debit under that Chapter if the other provisions of this Schedule had had effect in relation to the period, an amount, or a bigger amount, falls to be brought into account in accordance with section 128 or 130 of the Finance Act 1993.

(3) Where this paragraph applies, the other provisions of this Schedule shall have effect in relation to the subsequent accounting period mentioned in sub-paragraph (2) as if it were an accounting period beginning on or after 1st October 2002.

(4) In this paragraph, any reference to this Schedule includes a reference to—

(a) subsection (1) of section 79;

(b) the amendments made by Schedule 24, so far as relating to the amendments and other provisions made by or under this Schedule; and

(c) any repeal of any enactment which is consequential on any provision made by or under this Schedule.

Deferred foreign exchange gains U.K.

26 (1) The repeal of sections 139 to 143 of the Finance Act 1993 (c. 34) (foreign exchange gains and losses) does not prevent the making of a claim under section 139 of that Act (deferral of unrealised gains) by a company in respect of a gain accruing in an accrual period which begins with, or at any time in, the last accounting period of the company which begins before 1st October 2002; but any such claim shall have effect subject to the following provisions of this paragraph and (subject to regulations under section 81) regulations under Chapter 2 of Part 2 of that Act.

(2) Amounts which, but for the repeal of subsections (4) to (10) of section 140 of the Finance Act 1993, would fall to be treated by virtue of those subsections as exchange gains for an accrual period which consists of, or falls in, an accounting period beginning on or after 1st October 2002—

(a) shall be brought into account for that accounting period as if they were credits falling for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) to be brought into account in respect of the company’s loan relationships;

(b) shall be treated for the purposes of that Chapter as non-trading credits, to the extent that they would, but for the repeal of subsections (5), (8) and (9) of section 140 of the Finance Act 1993, have fallen to be treated by virtue of those subsections as non-trading exchange gains; and

(c) except as provided by paragraph (b), shall be brought into account under section 82(2) of the Finance Act 1996 (trading credits).

(3) Before the expiration of the period of 2 years following the end of its first accounting period beginning on or after 1st October 2002, a company may elect for any amounts that would otherwise fall to be brought into account for that accounting period in accordance with paragraph (a) of sub-paragraph (2) instead to be brought into account in accordance with that sub-paragraph, but—

(a) over the first 6 accounting periods of the company which begin on or after 1st October 2002; and

(b) in instalments of an equal amount for each such accounting period.

(4) If a company—

(a) makes an election under sub-paragraph (3), but

(b) ceases to be within the charge to corporation tax before six accounting periods of the company which begin on or after 1st October 2002 have elapsed,

any instalment under that sub-paragraph which does not fall to be brought into account for an earlier accounting period shall be brought into account for the accounting period in which the company ceases to be within the charge to corporation tax.

F6 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Sch. 23 para. 26(5) repealed (with effect in accordance with Sch. 11 Pt. 2(6) Note 3 of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 11 Pt. 2(6)