Statutory Instrument 1998 No. 3177

The European Single Currency (Taxes) Regulations 1998

(The document as of February, 2008)

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STATUTORY INSTRUMENTS

1998 No. 3177

TAXES

The European Single Currency (Taxes) Regulations 1998

	Made	17th December 1998
	Laid before the House of Commons	17th December 1998
	Coming into force	1st January 1999

ARRANGEMENT OF REGULATIONS

PART I
Introductory

1.	Citation and commencement.

2.	Interpretation.

3.	Definition of euroconversion.

PART II
Deductibility of Costs of Euroconversion of Shares and Other Securities

4.	Interpretation.

5.	Trading Companies.

6.	Investment companies and insurance companies - deemed expenses of management.

PART III
Exchange Gains and Losses, Interest Rate and Currency Contracts and Options,Debt Contracts and Options, and Relevant Discounted Securities

7.	Deferral of unrealised gains.

8.	Interest rate contracts (including options) - change in rate of interest.

9.	Currency contracts (including options) - change in rate of interest.

10.	Currency contracts (including options) - conversion into euro.

11.	Debt contracts (including options) - conversion into euro.

12.	Exchange or conversion of relevant discounted securities.

PART IV
Agreements for Sale and Repurchase of Securities

13.	Interpretation.

14.	Replacement of securities in a euroconversion.

15.	Payment or benefit received by interim holder on euroconversion.

16.	Payment deemed to be made by interim holder on euroconversion.

17.	Renominalisation resulting in new minimum denomination in which securities can be held or traded.

18.	Payment made or deemed to be made by interim holder in respect of euroconversion - chargeable gains consequences.

19.	Euroconversion - loan relationships consequences.

PART V
Stock Lending Arrangements

20.	Interpretation.

21.	Deemed capital payment.

22.	Renominalisation resulting in new minimum amount in which securities can be held or traded.

23.	Payment made by borrower to lender in respect of euroconversion - chargeable gains consequences.

PART VI
Repurchases and Stock Lending - Stamp Duty and Stamp Duty Reserve Tax

24.	Interpretation.

25.	Replacement of stock in a euroconversion.

26.	Replacement of chargeable securities in a euroconversion.

27.	Payment or benefit received by transferee of stock on euroconversion.

28.	Payment or benefit received by transferee of chargeable securities on euroconversion.

29.	Renominalisation resulting in new minimum denomination in which stock can be held or traded.

30.	Renominalisation resulting in new minimum denomination in which chargeable securities can be held or traded.

PART VII
Accrued Income Scheme

31.	Interpretation.

32.	Disapplication of accrued income provisions in respect of an exchange or conversion of securities resulting from a euroconversion.

33.	Disapplication of variable interest rate provision in certain circumstances.

34.	Calculation of accrued amount or rebate amount in the event of a euroconversion of securities.

35.	Treatment of capital sum receivable on euroconversion of securities.

PART VIII
Chargeable Gains

36.	Equation of holding of non-sterling currency with new euro holding on euroconversion.

37.	Equation of debt (other than a debt on a security) on euroconversion.

38.	Derivatives over assets the subject of euroconversion.

39.	Cash payments received on euroconversion of securities.

PART IX
Controlled Foreign Companies

40.	Replacement of currency used in accounts of controlled foreign company by euro.

PART X
Amendments to the Local Currency Elections Regulations

41.	Introductory.

42.	Period for determining validity of elections.

43.	Existing election for ecu or participating currencies.

44.	Treatment of existing part trade elections in participating currencies.

45.	Election for whole trade where part trade election already exists.

46.	Determination of rate of exchange where part trade election replaced by whole trade election or combined part trade election.

47.	Part trade elections for new part trades.

The Treasury, in exercise of the powers conferred on them by sections 93(1) and (6), 94(1), (2), (3) and (11) and 95 (1), (2) and (3) of the Finance Act 1993[1] and section 163 of the Finance Act 1998[2], hereby make the following Regulations:

PART I
INTRODUCTORY
Citation and commencement
1.These Regulations may be cited as the European Single Currency (Taxes) Regulations 1998 and shall come into force on 1st January 1999.

Interpretation
2. - (1) In these Regulations unless the context otherwise requires -

"commodity or financial futures" has the meaning given by subsection (2)(a) of section 143 of the 1992 Act, and references in these Regulations to commodity or financial futures include references to a commodity or financial futures contract referred to in subsection (7)(a) or (b);

"debt", other than a debt on a security, includes a debt owed by a bank which is not in sterling and which is represented by a sum standing to the credit of a person in an account in the bank;

"derivative" means any commodity or financial futures or an option;

"ecu" shall be construed in accordance with section 95(5) of the Finance Act 1993;

"euro" means the single currency adopted or proposed to be adopted as its currency by a member State in accordance with the Treaty establishing the European Community;

"euroconversion" has the meaning given by regulation 3;

"long-term capital asset" and "long-term capital liability" have the meaning given in relation to both those expressions by section 143(4) of the Finance Act 1993;

"member State" means a member State other than the United Kingdom;

"participating member State" means a member State that adopts the euro as its currency;

"qualifying contract" shall be construed in accordance with sections 147, 147A and 148 of the Finance Act 1994[3];

"reconventioning" in relation to a relevant asset means a change, consequent on simple redenomination, in the terms of the asset as a result of which the new terms become aligned to the prevailing terms of equivalent marketable relevant assets denominated in euro;

"relevant asset" means a debt (whether or not a debt on a security), a long-term capital asset, a long-term capital liability, an option, a qualifying contract, or any commodity or financial futures;

"renominalisation" in relation to a relevant asset means a change, consequent on simple redenomination, in the minimum nominal amount in which the asset can be held or traded to a new round amount;

"security" has the meaning given by section 132(3)(b) of the 1992 Act;

"simple redenomination" means the conversion of the currency in which an asset, liability, contract or instrument is expressed from the currency of a participating member State into euro, and any rounding of the resulting amount to the nearest euro cent;

"the Taxes Act" means the Income and Corporation Taxes Act 1988[4];

"the 1992 Act" means the Taxation of Chargeable Gains Act 1992[5].

(2) In these Regulations references to an option, without more, are references to an option to which section 144 or 144A[6] of the 1992 Act applies.

Definition of euroconversion
3. - (1) "Euroconversion" means -

(2) An equivalent replacement asset, liability, contract or instrument means an asset, liability, contract or instrument whose amount, terms and conditions are identical to what it is reasonable to assume would be the amount, terms and conditions of the original asset, liability, contract or instrument were it to undergo a simple redenomination, or (in the case of a relevant asset) a simple redenomination accompanied by either or both of renominalisation and reconventioning.

(3) For the purposes of paragraphs (1) and (2) a simple redenomination is accompanied (in the case of a relevant asset) by renominalisation or reconventioning if either -

PART II
DEDUCTIBILITY OF COSTS OF EUROCONVERSION OF SHARES AND OTHER SECURITIES
Interpretation
    4.References in this Part of these Regulations to a euroconversion in relation to shares and other securities of a company ("the original shares and other securities") are references to a euroconversion that is effected solely by the issue of shares and other securities in replacement of the original shares and other securities.

Trading companies
    5.Costs incurred in respect of a euroconversion of its shares or other securities by a company carrying on a trade shall be deductible in computing the amount of its profits chargeable to corporation tax under Case I of Schedule D as if those costs constituted money wholly and exclusively laid out or expended for the purposes of the trade within section 74(1)(a)[7] of the Taxes Act.

Investment companies and insurance companies - deemed expenses of management
    6. - (1) Costs which -

shall be treated as sums disbursed as expenses of management to which section 75(1) of the Taxes Act (deduction in computing total profits of an investment company for an accounting period) applies.

    (2) Costs incurred by a company carrying on life assurance business in respect of a euroconversion of its shares or other securities shall be deductible in computing the profits of that company chargeable to corporation tax under Case VI of Schedule D as if those costs were allowances falling to be made under Part II of the Capital Allowance Act 1990[8] and referred to in subsection (4) of section 434D[9] of the Taxes Act; and accordingly those costs shall be apportioned in accordance with that subsection between the different classes of life assurance business carried on by that company.

    (3) Section 76 of the Taxes Act (expenses of management: insurance companies) shall have effect as if the reference in subsection (1)(d)[10] of that section (disallowance of certain expenses as expenses of management) to expenses referable to different classes of life assurance business included a reference to costs apportioned to those classes of business under paragraph (2).

    (4) In this regulation -

"investment company" has the meaning given by section 130 of the Taxes Act;

"life assurance business" shall be construed in accordance with section 431(2) of the Taxes Act.

PART III
EXCHANGE GAINS AND LOSSES, INTEREST RATE AND CURRENCY CONTRACTS AND OPTIONS, DEBT CONTRACTS AND OPTIONS, AND RELEVANT DISCOUNTED SECURITIES
Deferral of unrealised gains
7. - (1) Where, as a result of a euroconversion of a long-term capital asset or of a long-term capital liability, that asset ("the original long-term capital asset") or that liability ("the original long-term capital liability") is replaced by a new long-term capital asset or a new long-term capital liability -

(2) In paragraph (1) "accrual period" shall be construed in accordance with section 158(4) of the Finance Act 1993.

Interest rate contracts (including options) - change in rate of interest
8.Where, as a result of the adoption of the euro by a member State -

the new contract shall be treated for the purposes of that section as if it were the same contract as the original contract, made when the original contract was made.

Currency contracts (including options) - change in rate of interest
9.Where, as a result of the adoption of the euro by a member State -

the new contract shall be treated for the purposes of that section as if it were the same contract as the original contract, made when the original contract was made.

Currency contracts (including options) - conversion into euro
10. - (1) This regulation applies in a case where, as a result of the adoption of the euro by member States -

(2) This regulation also applies in a case where -

(3) In each of the cases referred to in paragraphs (1) and (2) the new contract shall be treated for the purposes of section 126 or, as the case may be, section 150 as if it were a currency contract and were the same contract as the original currency contract, made when the original currency contract was made.

Debt contracts (including options) - conversion into euro
11. - (1) Where as a result of the adoption of the euro by a member State -

the new debt contract shall be treated for the purposes of section 150A of the Finance Act 1994[12] (debt contracts and options) as if it were the same contract as the original debt contract, made when the original debt contract was made.

(2) In paragraph (1) -

"debt contract" has the meaning given by section 150A(1) and (2) of the Finance Act 1994;

"loan relationship" has the meaning given by section 81 of the Finance Act 1996, read with section 150A(10) of the Finance Act 1994;

"qualifying company" shall be construed in accordance with section 154 of the Finance Act 1994.

Notes:

[1] 1993 c. 34.back

[2] 1998 c. 36.back

[3] 1994 c. 9. Section 147A was inserted by section 101(2) of the Finance Act 1996 (c. 8).back

[4] 1988 c. 1.back

[5] 1992 c. 12.back

[6] Section 144A was inserted by section 96 of the Finance Act 1994.back

[7] Section 74(1) was amended by section 144(2) of the Finance Act 1994 and by paragraph 1 of Schedule 7 to the Finance Act 1998.back

[8] 1990 c. 1.back

[9] Section 434D was inserted by paragraph 23 of Schedule 8 to the Finance Act 1995 (c. 4).back

[10] Section 76(1)(d) was amended by paragraph 1 of Schedule 7 to the Finance Act 1990 (c. 29), paragraph 1 of Schedule 7, and Part V of Schedule 19, to the Finance Act 1991 (c. 31), and paragraph 7 of Schedule 8 to the Finance Act 1995.back

[11] S.I. 1994/3228, amended by S.I. 1996/1348.back

[12] Section 150A was inserted by Schedule 12 to the Finance Act 1996.back