The measure

It has been announced that regulations have been laid to amend the 'Exchange Gains and Losses (Bringing into Account Gains and Losses) Regulations' (the EGLBAGL Regulations) in Statutory Instrument 2002/1970. In particular, the new regulations change the way in which previously disregarded foreign exchange movements are brought back into tax.

The EGLBAGL Regulations provide that, where foreign exchange gains or losses on loans or currency contracts used to hedge (for instance) a share asset have previously been disregarded for tax purposes (on the basis that they fall within the foreign exchange tax matching rules), they must be brought back into account when the share asset is disposed of.

The main affect of the amendments is that, instead of producing a 'free-standing' net chargeable gain or loss in respect of the previously disregarded foreign exchange movements, the disposal consideration for the share asset is adjusted.

The amendments seek to correct the position which arose previously, where the net chargeable gain or loss was not capable of being transferred within a group (under section 171A TCGA 1992) because the gain or loss did not accrue 'in respect of an asset'. There will also be an interaction with indexation allowance.

Who will be affected?

Companies which have used, or will use, the foreign exchange tax matching rules to disregard foreign exchange movements on hedging loans or currency contracts.

When?

The change applies where hedged assets are disposed of on or after 6 April 2010, subject to transitional rules.