(1)    These Regulations may be cited as the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2007 and shall come into force on 11th April 2007.

(2)    These Regulations have effect in relation to periods of account ending on or after 11th April 2007.

This is subject to paragraph (3).

(3)    Where a company ceased to be party to a debtor relationship to which regulation 12(1)(a)(i) of the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004 applies before 11th April 2007 regulation 6 shall not apply in respect of that relationship.

Amend the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004 as follows.

(1)    Amend regulation 4A (relevant value) as follows.

(2)    in paragraph (2)(c)(i)—

(a)    for “the first” substitute “an”;

(b)    after “2005” insert “(“the new period”)”.

(3)    In paragraph (3) for the words from “its” to the end substitute “the new period”.

In regulation 5 (regulations 3 and 4: supplementary), in paragraph (2) in sub-paragraphs (a) and (b) for “third condition” substitute “condition 2”.

(1)    Amend regulation 6 (rules about fair value profits and losses) as follows.

(2)    In paragraph (3) at the beginning insert “Except where an election has been made under paragraph (3A)”.

(3)    In paragraph (3A)—

(a)    for “to” substitute “and”;

(b)    in paragraph (a) at the beginning insert “regulation 7 shall not apply, to”;

(c)    in paragraph (b) at the beginning insert “regulation 8 shall not apply, to”.

(4)    In paragraph (5) after “(5A)” insert “and except where an election has been made under paragraph (5B)”.

(5)    In paragraph (6A) for “(5A)” substitute “(5B)”.

In regulation 12 (profits and losses arising from loan relationships with embedded derivatives), in paragraph (2)(a) for the words from “debits” to the end substitute

“all debits and credits in respect of the host contract save for—

(i)    debits in relation to interest accruing in respect of the debtor relationship,

(ii)    credits and debits in respect of discounts, premiums, fees and other incidental costs to the extent that these amounts are not within section 92A(3) of the Finance Act 1996, and

(iii)    debits and credits in respect of exchange gains and losses,

without regard to the amounts given by the effective interest method, and”.

Frank Roy

Alan Campbell

Two of the Lords Commissioners of Her Majesty's Treasury

21st March 2007

These Regulations amend the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004 (SI 2004/3256, as amended by SI 2005/2012, 2005/3374, 2006/843, 2006/936 and 2006/3236: “the Principal Regulations”) which allow certain profits and losses from loan relationships and derivative contracts to be left out of account, to be brought into account in a different way or to be brought into account at a later date.

Regulation 1 provides for citation, commencement and effect. The amendment made by regulation 5(2) does not have effect in relation to a debtor relationship to which a company ceased to be party before these Regulations came into force.

Regulation 2 introduces the amendments to the Principal Regulations.

Regulation 3 amends regulation 4A (relevant value) to extend the effect of this regulation to all accounting periods beginning on or after 1st January 2005.

Regulation 4 amends regulation 5 (regulations 3 and 4: supplementary) to correct a cross reference.

Regulation 5 amends regulation 6 (rules about fair value profits and losses). These amendments preclude an election under paragraph (3) or (5) where an election has been made under paragraph (3A) or (5B), clarify the consequences of an election under paragraph (5A) and amend a cross-reference consequential to the amendments made by SI 2005/2012.

Regulations 6 amends regulation 12 (profits and losses arising from loan relationships with embedded derivatives) in relation to loan relationships to which section 92A of the Finance Act 1996 (c 8) (convertible securities etc: debtor relationships) applied immediately before the start of the first accounting period of a company to begin on or after 1st January 2005 to widen the description of debits to be disregarded and makes provision for excluded amounts to be brought into account.

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.