The Exchange Gains and Losses (Alternative Method of Calculation of Gain or Loss) Regulations 1994

Deferral etc. of deemed gains and losses in certain cases

8.—(1) Paragraph (2) below applies in any case where a company (“the disposing company”) disposes of a matched asset to another company and neither a gain nor a loss accrues on that disposal by virtue of section 139(1), 140A(2), 171(3), 215 or 216 of the 1992 Act (“a no gain/no loss disposal”), and references below to the relevant disposal are references to that disposal.

(2) In any case where this paragraph applies, any deemed gain or loss which would (apart from this regulation) be deemed to accrue to the disposing company at the time of the relevant disposal by virtue of paragraph (6) or (7) of regulation 7 (“the deferred gain or loss”) shall not accrue at that time, but paragraph (3) or (4) below (as the case may be) shall apply.

(3) If the deferred gain or loss would have accrued by virtue of regulation 7(6), then for the purposes of the 1992 Act a chargeable gain or allowable loss (as the case may be) equal in amount to the amount of the deferred gain or loss shall be deemed to accrue—

(a) on the first disposal (after the relevant disposal) of the asset which is not a no gain/no loss disposal,

(b) to the company making that disposal.

(4) If the deferred gain or loss would have accrued by virtue of regulation 7(7), then an initial exchange gain or loss (as the case may be) equal in amount to the amount of the deferred gain or loss shall be deemed to accrue—

(a) on the first disposal (after the relevant disposal) of the asset which is not a no gain/no loss disposal,

(b) to the company making that disposal.

(5) In any case where paragraph (3) or (4) above applies on a subsequent disposal which is a part disposal of the asset in question, the amount of any deferred gain or loss shall be apportioned as between the part disposed of and the part retained and the amount of any gain or loss which is deemed to accrue on that part disposal by virtue of paragraph (3) or (4) shall be equal to the amount apportioned to the part disposed of.

(6) Paragraph (7) below applies where a disposal of a matched asset falls within regulation 7(1) and is also part of a transfer to which section 140(4) of the 1992 Act applies (or would apply disregarding this regulation).

(7) In any case where this paragraph applies, any gain or loss which would (apart from this paragraph) be deemed to accrue to the disposing company at the time of that disposal by virtue of paragraph (6) or (7) of regulation 7 (“the deferred gain or loss”) shall not accrue at that time but in computing any chargeable gain or allowable loss accruing as respects the matched asset the amount of the consideration for the transfer of that asset—

(a) if apart form this paragraph there would have been a deferred gain of any amount under regulation 7(6) or (7), shall be increased by an equal amount;

(b) if apart from this paragraph there would have been a deferred loss of any amount under regulation 7(6) or (7), shall be reduced by an equal amount;

and if sub-paragraph (b) applies and the amount of that deferred loss exceeds the amount of the consideration, an allowable loss equal to that excess shall be deemed to accrue as respects the asset on the disposal (in addition to any other loss which may accrue as respects that asset).

(1)

Section 139 was amended by section 251(5) of the Finance Act 1994.

(2)

Section 140A was inserted by section 44 of the Finance (No. 2) Act 1992 (c. 48).

(3)

Section 171 was amended by section 251(7)(b) of the Finance Act 1994.

(4)

Section 140 was amended by section 46(4) of the Finance (No. 2) Act 1992.