The Exchange Gains and Losses (Transitional Provisions) Regulations 1994

Modification of regulations 18 to 20 where nominal amount of debt increases after commencement

21.—(1) This regulation applies where the existing asset or liability to which this Part applies is the right to settlement of a debt, or a duty to settle a debt, the nominal amount of which is or has been increased on or after the company’s commencement day, and in this regulation “the original debt” means the debt as at the beginning of that day.

(2) Where this regulation applies—

(a) the calculations required to be made by regulations 18 and 19 shall first be made in relation to the original debt (on the assumption that it had not been increased on or after the company’s commencement day), and there shall be found the amount of any deemed gain or loss under regulation 20(1) basing the computations on the amounts found in accordance with those calculations, and

(b) there shall then be calculated the amount of the initial exchange gain or loss (if any) which would have accrued as respects the asset or liability if—

(i) Parts I to III of these Regulations were disregarded, and

(ii) the company had become entitled to the asset or subject to the liability at the beginning of its commencement day, and

(iii) the amount of the debt at the beginning of the company’s commencement day had been zero,

and the amount of any such gain or loss is referred to in this regulation as the “notional gain” or the “notional loss”, as the case may be.

(3) The amount of the notional gain or loss shall be aggregated with the amount of the deemed gain or loss found, in accordance with paragraph (2)(a) above, under regulation 20(1) and—

(a) if that aggregate amount is positive it shall be deemd to be the initial exchange gain accruing to the company as respects the asset or liability for the current period;

(b) if that aggregate amount is negative it shall be deemed to be the initial exchange loss accruing to the company as respects the asset or liability for the current period;

(c) if that aggregate amount is zero there shall be deemed to be neither an initial exchange gain nor an initial exchange loss accruing to the company as respects the asset or liability for the current period;

and any initial exchange gain or loss which disregarding this Part would accrue to the company as respects the asset or liability for the current period shall (in accordance with regulation 20(1)) be deemed not to accrue.

(4) Where this regulation applies, regulation 20(1) shall have effect (in accordance with paragraph (2) above) with the omission of the words “and shall be an initial exchange gain or loss (as the case may be) accruing in the place of the actual gain or loss”.

(5) Where the debt in question is not wholly repaid at one time, then for the purposes of this Part any amount repaid after commencement shall be taken to reduce the amount of the original debt first, before any amount by which that debt has been increased is reduced.