Regulation 16 Set off of certain pre—commencement losses against exchange gains
A company may elect by notice to the inspector, before the expiry of the period of 92 days beginning with the company’s commencement day or, if later, the expiry of the period of 183 days beginning with 23rd March 1995, that available losses shall be available to be set against the company’s exchange gains in accordance with paragraphs (9) to (11) below, and an election under this paragraph—
may be made in relation to the whole of the available losses or such amount, less than the whole of the available losses, as may be specified in the election; and
shall be irrevocable.
Subject to paragraphs (4) to (8) below, in this regulation “available losses”, in relation to any company, means allowable losses which—
accrued to the company before its commencement day at a time when it was within the charge to corporation tax, and
accrued either—
on the disposal of assets which if they had not been disposed of before the company’s commencement day would have been qualifying assets, or
other than losses which are attributable to assets which would not have been qualifying assets if they had been held by the company on its commencment day.
For the purposes of paragraph (2) above, a loss is attributable to an asset (“the first asset”) if and to the extent that—
it accrued on the disposal of another asset by the company (“the second asset”), and
the first asset was the subject of a reorganisation or other transaction to which section 127 of the 1992 Act applied, and
either—
the second asset was held by the company in pursuance of that reorganisation or other transaction, or
the second asset was held by the company in pursuance of a transaction which is the last in a series of transactions, the first of which is the transaction referred to in sub-paragraph (b) above, and of all of which are either transactions to which section 127 of the 1992 Act applied or no gain/ no loss disposals (within the meaning of regulation 14(9)) so that the loss has been calculated by reference to the acquisition or other costs of the first asset.
References in this paragraph to a reorganisation or other transaction to which section 127 of the 1992 Act applied include a reference to any reorganisation or other transaction to which that section would have applied but for section 116 of that Act.
A loss which has accrued to a company on the disposal of an asset is not an available loss if—
had a gain instead accrued on that disposal, the company would not have been chargeable to corporation tax in respect of that gain; or
it has been deducted, or is deductible, under section 8(1) of, or Schedule 7A to, the 1992 Act from any chargeable gains which have accrued to the company in accounting periods ending before the company’s commencement day.
Paragraph (6) below applies in any case where—
an allowable loss has accrued to a company on the disposal of an asset, and
the asset was held by the company at any time when it was not resident in the United Kingdom, and
if the asset had been disposed of at that time and a gain had accrued to the company on that disposal, it would not have been included in the company’s chargeable profits by virtue of section 10(3) of the 1992 Act.
Where this paragraph applies—
there shall be computed the amount of the allowable loss (if any) which would have accrued to the company on the disposal if it had acquired the asset, at market value, on the first day on which any gain which would have accrued to the company if the asset had been disposed of on that day (assuming that the disposal gave rise to a gain and disregarding any allowable losses which might be available for deduction under section 8(1) of or Schedule 7A to the 1992 Act) would have been included in the company’s chargeable profits for the purposes of corporation tax (whether because the company became resident or the asset became situated in the United Kingdom on that day or for any other reason); and
if there is neither a loss nor a gain or there is a gain on that computation, there shall be taken to be a loss of zero;
and the available losses shall be reduced by an amount equal to the excess of the amount of the allowable loss referred to in paragraph (5)(a) above over the amount of the loss found under paragraph (a) or (b) above.
In any case where the company acquired the asset on a no gain/no loss disposal, then references in paragraphs (5)(b) and (c) and (6)(a) above to a company include the company from which it acquired the asset, and if that company also acquired the asset on such a disposal, to the company from which it acquired the asset, and so on for a series of such disposals.
For the purposes of this paragraph an asset is acquired on a no gain/no loss disposal if, by virtue of any enactment specified in section 35(3)(d) of the 1992 Act, neither a gain nor a loss accrues to the person making the disposal.
Where losses have accrued to a company for accounting periods ending before the company’s commencement day (but after the last accounting period, if any, as respects which the company did not have a surplus of allowable losses available to be carried forward to the next accounting period under section 8(1)(b) of or Schedule 7A to the 1992 Act) in respect of assets falling within paragraph (2)(b) above and also in respect of other assets, the losses accruing in respect of those other assets shall not be available losses, and for the purposes of determining in such a case which losses are available and which are not—
losses which have accrued as respects assets falling within paragraph (2)(b) above shall be taken to have been set off first against gains accruing on such assets, and
losses which have accrued as respects other assets shall be taken to have been set off first against gains accruing on such other assets.
Losses as respects which an election made by a company has effect under this regulation shall be set against any exchange gain which accrues to the company—
in an accounting period beginning on or after the company’s commencement day, and
either—
in respect of a regulation 6(3) asset or an asset which would be a regulation 6(3) asset if it were an existing asset held by the company; or
in respect of a currency contract which before the company’s commence— ment day (assuming the contract to have been in existence then) would have fallen within section 143 of the 1992 Act;
and losses shall be set against gains accruing in earlier accounting periods rather than later periods.
Where a loss is to be set against a gain under this regulation the amount of the loss shall be deducted from the gain before the application of section 128(4) or 129(2) (whichever is applicable).
Any reference in paragraphs (1), (9) and (10) above to an exchange gain in relation to a company is a reference to a gain which has accrued (or been deemed to accrue) to the company for an accrual period as respects any asset, liability or contract after regulations 12 and 13 and the regulation 2(2) provisions have applied (if they are applicable) as respects the asset, liability or contract for that accrual period; but computations under regulations 12 and 13 shall be made disregarding any set—off under this regulation.
Where allowable losses have accrued on disposals occurring at different times, and the election is made in relation to an amount rather than to the whole of the allowable losses, the losses constituting that amount shall be taken for all purposes to be those losses accruing on earlier disposals rather than those accruing on later disposals, and any allowable losses which constitute an amount specified in an election under this regulation shall not be available for deduction under section 8(1) of, or Schedule 7A to, the 1992 Act.
In this regulation—
any reference to a company’s commencement day in relation to any company which, by virtue of regulation 3, has more than one commencement day, is a reference to the first such day; and
any expression which is not defined in Chapter II shall have the same meaning as in the 1992 Act.
Annotations
Footnotes
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Section 143 was amended by section 95 of the Finance Act 1994.
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