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Regulation 13 - disposals of creditor loan relationships

Regulation 13 differs from the rest of the EGLBAGL Regulations in providing for the ‘bringing back into account� of exchange gains or losses that have arisen in respect of an asset, rather than in respect of a liability or derivative contract. Notwithstanding the heading of the regulation (‘Cases where matched assets represent loan relationships�), it applies in any case where exchange gains or losses on a loan relationship asset have been taken to reserves, whether or not the asset was matched. CFM61140 explains that, where a loan forms part of a long-term investment in a subsididary, exchange differences may be accounted for in this way.

A net gain is brought back into account as a loan relationship credit in the accounting period in which there is a disposal of the loan relationship asset. Similarly, a net loss is brought back into account as a loan relationship debit. A disposal (or part disposal) will occur if the loan is wholly or partly repaid, or it is transferred to a new creditor. This includes intra-group transfers that are treated as being at notional carrying value by CTA09/S340 - regulation 13 has no special rule for no gain/no loss disposals.

Broadly, the credit or debit is the aggregate of exchange differences on the asset that have been taken to reserves. This will comprise

• exchange differences arising in accounting periods beginning on or after 1 October 2002 but before 1 January 2005, that were taken to reserves and disregarded under FA96/S84A(4) (as that subsection stood at the relevant time); plus
• exchange differences taken to the STRGL (statement of total recognised gains and losses) or statement of changes in equity in periods beginning on or after 1 January 2005.

If the loan was in place in periods beginning before 1 October 2002, exchange differences taken to reserves in these periods are not included.