Explanatory note

These Regulations amend the Exchange Gains and Losses (Insurance Companies) Regulations 1994 (S.I. 1994/3231) (“the principal Regulations”). They make new provision regarding the computation of the chargeable gain or allowable loss accruing to an insurance company on the disposal of certain assets.

Regulation 1 provides for citation, commencement and effect, and regulation 2 for the principal Regulations to be amended in accordance with regulations 3 to 5.

Regulation 3 substitutes a new paragraph (3) of regulation 1 in the principal Regulations. This paragraph provides general definitions for the purposes of the principal Regulations.

Regulation 4 provides for a number of new regulations (7 to 12) to be added to the principal Regulations. The new regulation 7 specifies the assets to which regulations 8 and 9 apply (a “regulation 7 asset”): the assets so specified are certain assets denominated or expressed in a currency other than sterling and which are held in exempt circumstances (an expression to be construed in accordance with paragraph 3 of Schedule 17 to the Finance Act 1993). The new regulation 8 provides for the chargeable gain or allowable loss accruing on the disposal of a regulation 7 asset to be computed by reference to the basic valuation of the asset translated into sterling, first at the time immediately after the company becomes entitled to the asset and, secondly, at the time immediately before the company ceases to be entitled to the asset. The new regulations 9 to 12 provide for the new regulation 8 to apply in a modified form in certain cases. The new regulation 9 applies where a regulation 7 asset was held immediately before 1st April 1996; the new regulation 10 where, for the purposes of sections 126 to 131 of the Taxation of Chargeable Gains Act 1992, a regulation 7 asset constitutes the original shares and another regulation 7 asset constitutes the new holding; the new regulation 11 where an asset is a regulation 7 asset by virtue of the new regulation 7(5) and has not always represented a loan relationship; and the new regulation 12 in any case where an asset is a regulation 7 asset by virtue of the new regulation 7(6).

Regulation 5 revokes regulation 6 of the principal Regulations.