INCOME TAX Citation, commencement and effect 1 1 These Regulations may be cited as the Exchange Gains and Losses (Alternative Method of Calculation of Gain or Loss) (Amendment) Regulations 1996 and shall come into force on 30th June 1996. 2 Regulation 4 shall have effect as respects accrual periods ending on or after 30th June 1996. Interpretation 2 In these Regulations “the principal Regulations ” means the Exchange Gains and Losses (Alternative Method of Calculation of Gain or Loss) Regulations 1994 , and “regulation” means a regulation of those Regulations. Amendments to the principal Regulations 3 In regulation 4(2) the following definition shall be added at the end— “qualifying asset” shall be construed in accordance with subsection (1) of section 153 of the 1993 Act, read with subsections (3) and (4) of that section . 4 1 Regulation 5 shall be amended as follows. 2 In paragraph (2) for the words “paragraph (3)” there shall be substituted “paragraphs (3) and (3A)”. 3 In paragraph (3) after the word “then” there shall be inserted “, subject to paragraph (3A) below,”. 4 After paragraph (3) there shall be inserted the following paragraph— 3A If in a case where this regulation applies— a only a proportion of a liability owed by the company is matched with an asset, not being an asset that is a ship or an aircraft, or b another liability owed by the company is eligible to be matched with that asset at the time the election is made, but is not matched, and c an exchange loss in relation to— i the whole of the liability referred to in sub-paragraph (a) or (b), or ii a proportion of that liability, being in the case of the liability referred to in sub-paragraph (a), a greater proportion than the proportion matched, is shown in the company’s accounts for the period which is or includes the current period, in the reserves, the amount of the initial exchange loss as respects that liability for the current period, calculated in accordance with this regulation, shall be reduced by the amount by which the exchange loss shown in the reserves and relating to that liability exceeds the exchange loss relating to the proportion (if any) of the liability that was matched. 5 In paragraph (6)(c) after the words “sub-paragraph (a) or (b) above” there shall be added “and which is not a qualifying asset”. 6 In paragraph (7)— a the word “and” immediately following sub-paragraph (a) shall be omitted; b after sub-paragraph (a) there shall be inserted the following sub-paragraphs— aa all shares in the same company shall constitute a single asset, ab all debts on a security issued by the same company shall constitute a single asset, and . 5 In regulation 10— a in paragraph (2)— i sub-paragraphs (a) and (d) shall be omitted; ii in sub-paragraph (c) after the word “liability” there shall be inserted “to be matched by the election”; b in paragraph (5)— i for the words “specified in”, wherever occurring, there shall be substituted “matched by”; ii for the words from “the liability ceases” to “any other liability” there shall be substituted “in any such case at any time after the election is made or, in the case of an election to which regulation 11(2) applies, has effect, the company is subject to another eligible liability”; c in paragraph (6) for the words “specified in”, where those words first occur, there shall be substituted “matched by”. 6 In regulation 11— a in paragraph (5)(a) after the words “that company” there shall be inserted “or, where the direction is given on or after 1st April 1996, no earlier accounting period of that company is an ADP exempt period”; b after paragraph (5) there shall be added the following paragraph— 6 In paragraph (5) above “ADP exempt period” means an accounting period of the company— a which begins on or after 28th November 1995, and b in respect of which the company has pursued, within the meaning of Part I of Schedule 25 to the Taxes Act, an acceptable distribution policy. Simon Burns Michael Bates Two of the Lords Commissioners of Her Majesty’s Treasury 21st May 1996