GIM5120 - Taxation of the investment return: corporate and government debt: accounting periods ending after 31 March 1996: periods beginning on or after 1 October 2002
For periods beginning on or after 1 October 2002, substantial changes were made to the loan relationships legislation. In particular, for these periods it covers exchange gains and losses on-
- loan relationships
- money debts which are not loan relationships (e.g. trade balances such as unpaid claims and premiums)
- foreign currency notes and coins
- provisions, including technical reserves for unpaid claims (see GIM6120)
- specified insurance balances - unearned premium reserves, unexpired risk reserves and deferred acquisition costs (FA96/S100 (10)(b) and FA96/S100 (11)(b)) (see GIM6060)
Exchange gains and losses are brought into account in accordance
with UK GAAP, which for insurance companies means SSAP 20, IAS 21
and the relevant provisions of the 2005 ABI SORP (paragraph 219)
(see
GIM2040+).
Other special loan relationships rules introduced by FA 2002
applying to companies where a disposal of the asset concerned would
be a disposal in the course of activities which form an integral
part of its trade were:
FA96/S87A (2) taken together with FA96/S87 and
FA96/SCH9/PARA6 prevents any relief for bad debts where the
creditor and debtor are connected. It does not, for periods
beginning on or after 1 October 2002, require shares a sale of
which gives rise to a trading receipt to be taken into account in
determining whether a general insurer has control of another
company.
FA96/SCH9/PARA20 (3) taken together with FA96/SCH9/PARA2 and
FA96/SCH9/PARA18 defers relief for late paid interest and for
discounts where one party has a “major interest” in the
other. It does not, for periods beginning on or after 1 October
2002, require shares a sale of which gives rise to trading receipt
to be taken into account in determining whether a general insurer
has control of another company.
