CORPORATION TAX - exchange gains and losses - transitional provisions - delayed application of 1993 legislation to certain fluctuating debts - agreed that in this appeal the amounts of the debts were fixed - whether the terms of the debts were fixed - yes - whether it was provided that any part of the principal once repaid could not be withdrawn - yes - appeal dismissed - FA 1993 Ss 165(4); Exchange Gains and Losses (Transitional Provisions) Regulations 1994 SI 1994 No. 3226 Reg 3(1)(d) and 3(6)(b)(ii)

THE SPECIAL COMMISSIONERS

FINANCE LIMITED
Appellant

 - and -   	

(HM INSPECTOR OF TAXES)
Respondent

SPECIAL COMMISSIONERS : DR A N BRICE (Chairman)
 DR D W WILLIAMS

Sitting in London on 28 April  2003

Jonathan Peacock QC, instructed by Messrs Ernst & Young Chartered Accountants,  for the Appellant

Philip Jones of Counsel, instructed by the Solicitor of Inland Revenue, for the Respondent

© CROWN COPYRIGHT 2003

ANONYMISED DECISION 
 
The appeal

1.	Finance Limited (the Appellant) appeals against an assessment to corporation tax dated 14 January 2000 in respect of the accounting period ending on 31 December 1996. We were asked to give a written decision in principle on one issue in the appeal, namely whether eight loans entered into by the Appellant were fixed debts for the purposes of the transitional provisions relating to the taxation of exchange gains and losses.  If the loans were fixed debts then we were informed that exchange gains in the region of £29M would be included in the Appellant's taxable profits for its accounting period ending on 31 December 1996.

The legislation

2.	Part II (sections 51 to 184) of the Finance Act 1993 (the 1993 Act) introduced amendments to the legislation relating to income tax, corporation tax and capital gains tax. Chapter II of Part II (sections 125 to 170) contained provisions about exchange gains and losses. Section 165 contained the commencement and transitional provisions the effect of which was that each company had its own commencement day which was the first day of its first accounting period to begin after 23 March 1995. Section 165(1) and (2) provided:

"(1)	This Chapter applies where-
(a)	a qualifying asset is one to which the company becomes entitled on or after the company's commencement day;
(b)	a qualifying liability is one to which the company becomes subject on or after that day;
(c)	the rights and duties under a currency contract are ones to which the company becomes entitled and subject on or after that day.

 (2)	Where a qualifying asset or liability is held or owed by a qualifying company both immediately before and at the beginning of its commencement day, for the purposes of this Chapter the company shall be treated as becoming entitled or subject to the asset or liability at the beginning of its commencement day.  … "

3.	Thus the effect of section 165(2) was to apply the new provisions in Chapter II to loans in existence on the company's commencement day. However, section 165(4) provided that in certain circumstances the application of Chapter II could be delayed. Section 165(4) read:

"(4)	Regulations may provide that where-
(a)	a qualifying asset or liability is held or owed by a qualifying company both immediately before and at the beginning of its commencement day, and
(b)	the asset or liability is of a prescribed description
subsection (2) above shall not apply and for the purposes of this Chapter the company shall be treated as becoming entitled or subject to the asset or liability at such time (falling after its commencement day) as is found in accordance with the prescribed rules."

4.	The Regulations referred to in section 165(4) were the Exchange Gains and Losses (Transitional Provisions) Regulations 1994 SI 1994 No. 3226 (the 1994 Regulations). Regulation 3 contained provisions about the delayed application of Chapter II in relation to certain fluctuating debts and the relevant parts of Regulation 3 provided:

"3(1)	Subject to paragraph (5) below, paragraph (2) below applies in relation to an asset or liability which is held or owed by a company and falls within section 165(4)(a) where- …
(c)	the asset or liability is the right to settlement of a debt or the duty to settle a debt, and
(d)	the amount of the debt or the term of the debt (or both) are not fixed."

5.	Paragraph 3(2) provided for the delayed application of Chapter II until the amount of the debt was increased or until the sixth anniversary of the company's commencement day. Paragraph 3(5) provided that paragraph 3(2) did not apply if a company elected that section 165(2) should apply. The relevant part of paragraph 3(6) provided:

"(6)	For the purposes of this regulation the term of a debt is fixed if (and only if) -
(a) 	… or
(b)	it is provided that-
(ii )	any part of the principal once repaid cannot be withdrawn; and … "

6.	Thus the scheme of the legislation was to delay the application of Chapter II in respect of certain fluctuating debts, that is debts where the amount or the term (or both) were not fixed. It was agreed that in this appeal the amounts of the debts were fixed. Regulation 3(6)(b) provided that the term of a debt was fixed only if "it is provided that any part of the principal once repaid cannot be withdrawn". 

The issue

7.	It was agreed that, if the loans were fixed loans, then tax was due on the exchange gains in 1996 but that, if the loans were not fixed loans, then tax was delayed under the 1994 Regulations. It was also agreed that there was no express term in the loans at issue in the appeal that any part of the principal once repaid could not be withdrawn. 

8.	The Appellant argued that the delayed application of Chapter II applied to the loans at issue in the appeal which were fluctuating debts because the loan agreements did not specifically provide that any part of the principal once repaid could not be withdrawn. The Inland Revenue argued that the delayed application of Chapter II did not apply because the loans were fixed debts and that a provision that any part of the principal once repaid could not be withdrawn could be implied because the loan agreements had originally provided that any part of the principal once repaid could be withdrawn and had been specifically amended to remove that provision. 

9.	Thus the issue for determination in the appeal was whether the application of Chapter II to the loans at issue in the appeal was delayed. Specifically, the question arising out of that issue was whether the loans were fixed debts and, in particular, whether it was provided that any part of the principal once repaid could not be withdrawn within the meaning of Regulation 3(6)(b)(ii) of the 1994 Regulations. 
 
The evidence

10	The parties produced a statement of agreed facts and an agreed bundle of documents.

The facts

The Appellant and its borrowings

11	The Appellant is a wholly owned subsidiary of Group Plc. The Appellant provides finance and treasury service to members of the group and, in particular, makes loans to, and borrows from, other group companies. 

The eight loans

12.	Between 30 July 1991 and 18 February 1994 the Appellant entered into eight loans to borrow money from other companies in the group. One loan was of Swiss francs, one was of Belgian francs and six were of Dutch guilders. Originally, each loan provided for a facility to be available to the Appellant that could be drawn down, repaid and drawn down again as required. 

13.	We saw all eight loan agreements but describe only the first in detail. It was dated 30 July 1991 and was made between a Swiss company in the Appellant's group as lender and the Appellant as borrower. The relevant parts of Articles 1 and 4 provided:

"Article 1 - Amount of Loan
The Lender agrees to lend to the Borrower who agrees to borrow an amount of up to SWF 20,000,000 (twenty million Swiss Francs) … for a period from 1 January 1989 to 31 December 1995. The loan shall be drawn down to the extent required by the Borrower during the period 1 January 1989 to 31 December 1995. …".

Article 4 - Repayment
The loan shall be repaid to the Lender no later than 31 December 1995. … The Borrower may make early repayment of the loan … The Borrower's right to draw down funds according to the provisions of Article 1 will remain unaffected by any early repayments made by the Borrower".   

The framework of the 1993 legislation

14.	Before the enactment of the relevant provisions in the 1993 Act some gains and losses arising from currency fluctuations were treated as trading profits or losses under Schedule D Case I and some as capital gains or losses under the legislation relating to the taxation of capital gains. Some gains and losses were taxed when they accrued (the translation basis) whereas others were taxed when they were realised (the realisation basis). Exchange differences arising on non-trade assets and liabilities, and on capital assets and liabilities outside the capital gains tax regime, were not subject to tax at all. These were commonly referred to as "nothings" as they gave rise neither to a gain nor a loss. However accounting practice under SSAP 20 made no such distinction between types of exchange gains and losses.   

15.	The aim of the 1993 legislation was to bring the taxation of exchange gains and losses broadly into line with accounting practice and to ensure that companies recognised exchange differences on monetary assets and liabilities on the translation basis, namely on the balance sheet date if this was earlier than realisation. This was achieved by the changes in Chapter II Part II of the 1993 Act. Briefly, the aim of the new regime was to tax all exchange gains, and to relieve all exchange losses, and thus to bring "nothings" within the tax regime. However, it was appreciated that some  transitional provisions would be required for fluctuating debts which varied from time to time as, in respect of such debts, there might be some difficulty in determining what amount should be brought in at the start of the new regime and, further, there would be a new tax charge where there had previously been none. There was also the difficulty of applying the new regime (based on accrual of exchange differences) to fluctuating debts where the amount outstanding could change from day to day. The effect of the 1994 Regulations, therefore, was to delay the commencement of the new regime in respect of loans which were fluctuating debts, namely those that were "nothings" under the old regime. The delay was until the debt increased or, if later, the sixth anniversary of the company's commencement day. 

16.	Under section 165 of the 1993 Act the Appellant's commencement day was 1 January 1996. If the Appellant had done nothing before its commencement day it would have been exposed to tax under the new regime in respect of all its fixed debts as from 1 January 1996 and in respect of its fluctuating debts (in the absence of an election) from the date of the first roll-over of each after 1 January 1996. The Appellant did consider whether to defer the application of the new regime as long as possible but decided against such an approach. It determined to enter into the new regime in full in respect of its eight non-sterling loans, by converting them into fixed loans, but to protect itself against the tax consequences by entering into tax equalisation swaps with a Bank. 

December 1995 - the supplemental agreements and the swap contract

17.	Accordingly in December 1995 the Appellant decided to amend the terms of the loans with a view to making them fixed loans and to enter into hedging transactions with the Bank to hedge the tax position of the group. It was then expected that sterling would depreciate against the other currencies. 

18.	At a meeting on 13 December 1995, attended by representatives of the Appellant and its advisers, it was agreed in relation to the eight loans that "the sentence regarding the redrawing of funds repaid should be removed". In a letter dated 20 December 1995 the advisers wrote to say that they understood that supplemental agreements had been drafted "with the intention of converting fluctuating nothings to fixed nothings".  

19.	The loans were amended by supplemental agreements. Six loans were amended on 15 December 1995, one on 29 December 1995 and the remaining loan was most probably amended in December 1995. The supplemental agreement for the first loan recited the loan agreement of 30 July 1991 and the fact that during the period of the loan the borrower was permitted to draw down, repay or redraw amounts up to the facility amount and that the lender and the borrower had agreed to amend the terms of the loan agreement with effect from 29 December 1995. The relevant provisions of the supplemental agreement were:

"1	This Supplemental Agreement is supplemental to the Loan Agreement.

2.	Article 1 - Amount of Loan is hereby deleted and replaced with the following:-

"Article 1 - Amount of Loan
The Lender agrees to lend to the Borrower who agrees to borrow an amount of SWF 7,500,000 (seven million five hundred thousand Swiss Francs) for a period from 29 December 1995 to 31 December 2001."

3	Article 4 - Repayment is hereby deleted and replaced with the following:-

"Article 4 - Repayment
The loan shall be repaid in full to the Lender on 31 December 2001. Repayment shall be made in the currency of the loan. The Borrower may make early repayment of the loan  … ."   

5.	All other terms and conditions of the Loan agreement shall remain in full force and effect."

20.	The other supplemental agreements were in similar terms although some did not contain any provision for early repayment of the loan. 

21.	On 21 December 1995 swap contracts were entered into with the Bank. The agreement was that, if there were a tax charge, the Bank would compensate the Appellant and if there were a loss then the Appellant would pay the Bank. The advantages of these hedging transactions were that the Appellant was protected from future tax charges on exchange gains although it gave up the benefit of future tax relief on exchange losses. A premium of £6.5M was paid to the Appellant by the Bank. 

22.	After 1 January 1996 sterling appreciated against the currencies of the loans in 1996 and exchange gains were made on the loans in that year amounting to something in the region of £29M. 

The arguments of the parties

23.	The case for the Appellant was that the loans were not fixed within the terms of the 1994 Regulations because there was no express provision in the loans that any part of the principal once repaid could not be withdrawn. Mr Peacock argued that the phrase "it is provided that" required an express and not an implied provision. Generally, he argued that regard had to be had to the exact words of the legislation, the context in which the words were used, and the purpose of the relevant provisions. The exact words were clear and unambiguous and one should look only at what was clearly said relying upon Inland Revenue Commissioners v Quigley [1995] STC 931 at 938-9. It had manifestly been the intention of Parliament that fluctuating nothings should have a different treatment from other assets or liabilities and that intention could only be limited or curtailed by an express statutory provision or by an implied provision which was both necessary and unambiguously required, relying upon Carr v Armpledge [2000] STC 410 at 416. Mr Peacock referred to a number of other statutory provisions both in regulation 3 of the 1994 Regulations and elsewhere to support his argument that an express provision was required and that it could not be implied. Finally, Mr Peacock argued that the fact that, in respect of the third loan, part of the principal once repaid was subsequently withdrawn was inconsistent with an implied term barring a right to re-draw.     

24.	The case for the Respondent was that there was an implied term in each supplemental agreement that any part of the principal once repaid could not be withdrawn.  The original loans had contained an express provision that the right to draw down funds up to the limit of the loan facility remained unaffected by early repayments. That provision had been specifically removed by the supplemental agreements and so the borrower had no right to re-draw funds once repaid. The fact was that on a true construction of the loan agreements, read with the supplemental agreements, no part of the principal once repaid could be withdrawn. The loans were therefore fixed. 

Reasons for decision

25.	In considering the arguments of the parties we first consider the authorities cited to us to see what principles we should apply. We then consider the actual words of Regulation 3(6)(b)(ii) and form a view on the words of the legislation. Finally, we consider each of the other statutory references put before us by way of comparison. 

26.	Beginning then with the authorities, Mr Peacock relied for general principles upon Quigley and Armpledge. Quigley (1995) at 938j to 939a is authority for the principle that we must look simply at what is said in the legislation and that the answer depends upon an examination of the words used. Armpledge (2000) at 416 is authority for the principle that a taxpayer is entitled to take advantage of a relief, subject only to an express or implied statutory prohibition, and implication may only be made where it is necessary and where the statute unambiguously so requires. 

27.	Applying those principles to the facts of the present appeal we now look simply at what is said in regulation 3(6)(b)(ii). The question at issue in this appeal is whether it has been "provided that" any part of the principal once repaid cannot be withdrawn. In the original loan agreements there was a specific right to withdraw parts of the original sum that had been repaid. It was then the declared intention of the parties to remove that right and this was done in the supplemental agreements. The effect of the supplemental agreements, read together with the original loan agreements, was that the right to withdraw parts of the principal once repaid was specifically removed. From that it follows that the correct construction of the agreements between the parties is that any part of the principal once repaid could not be withdrawn. If either party were to be asked whether the provisions of both agreements read together provided that any part of the principal once repaid could not be withdrawn the answer would be a resounding yes. 

28.	The question which then arises is whether the words "it is provided that" in regulation 3(6)(b) require there to be an express provision in an agreement. On the ordinary meaning of the words we do not consider that an express provision is required. The New Shorter Oxford English Dictionary defines "provided" as "on the condition, supposition or understanding that, or it being stipulated or arranged that". These meanings indicate that the word "provided" means something much less formal than an express statement. The words are not "it is expressly provided that" and we must not read words in that are not there.

29.	Accordingly, having considered the actual words of Regulation 3(6)(b)(ii) in the light of the principles in Quigley and Armpledge we are of the view that the words "it is provided that" do not require an express statement so long as the provision can be shown to be part of the agreement, understanding or arrangement between the parties. On the facts before us we consider that a provision that part of the principal once repaid could not be withdrawn was part of the agreement, understanding and arrangement between the parties to the loan agreements and supplemental agreements. However, before reaching a final conclusion we consider each of the other statutory references put before us by way of comparison.

30.	Mr Peacock first invited us to consider the context of Regulation 3(6) and so we now set it out in full. It reads:

"(6)	For the purposes of this regulation the term of a debt is fixed if (and only if) -
(a) 	it falls within paragraph (9) below, or
(b)	it is provided that-
(i)	the principal is to be repayable in total on one specified date or in specified amounts or proportions on specified dates; and
(ii )	any part of the principal once repaid cannot be withdrawn; and
(iii)	any interest which, if not paid when due, is to be capitalised or rolled up, is to be added to the principal on the due date and repayable on the same terms as the principal.  

31.	Mr Peacock argued that the use of the words "if and only if" in regulation 3(6) indicated that it was the intention of Parliament that a narrow approach should be adopted to the definition of a fixed debt. That was confirmed by the reference in paragraph 3(6)(b)(i) to "a specified date"; the specified date in paragraph 3(6)(b)(i) had to be expressly provided and so the opening words "it is provided that", which applied to the whole of regulation 3(6)(b), required an express provision. On the other hand, Mr Jones, for the Respondent, argued that the fact that an implied term was possible was confirmed by regulation 3(6)((b)(i) which referred to a provision that the principal was to be repayable; there might not be an express term that the loan was to be repayable but the use of the word "loan" implied an intention to repay. It was also possible to have an oral agreement for a loan and so not everything had to be in writing. Regulation 3(6)(b) did not provide that the matters mentioned had to be "expressly" provided. The word "provided" was not the same as "specified"; although "specified" might require an express provision or possibly a reference to a formula, "provided" could include both an express and implied provision.

32.	We agree with Mr Peacock that the use of the words "if and only if" do indicate an intention that a narrow approach is to be adopted to deciding whether the term of a debt is fixed.  However, that cannot alter the meaning of the other words used in paragraph 3(6). We agree that paragraph 3(6)(b)(i) refers to specified dates and specified amounts and so such dates and amounts do have to be specified. However,  the word "specified" is not the same as the word "provided". One meaning of "specified" in the Shorter Oxford Dictionary is to state something definitely or explicitly; however, as mentioned above, "provided" has a more general meaning. The fact that the word "specified" is used in one part of the regulation and that the word "provided" is used in another indicates to us that it was the intention that "provided" should have a less formal meaning than "specified".  

33.	Mr Peacock relied upon R v Winchester Area Assessment Committee [1948] 2 KB 455 and Re Net Book Agreement [1962] 1 WLR 1347. In Winchester Area Assessment Committee a proposal for the amendment of a valuation list had to "specify" the grounds of the proposal. At 460 Scott LJ held that "specified" meant "clearly stated and stated with some definiteness or particularity". However, it was enough if the proposal specified whether an increase or decrease was asked for; specified to which valuation the proposal referred; and stated the ground of complaint as "incorrect or unfair". Asquith LJ held at 463-4 that statements in other parts of the proposal could be prayed in aid to "eke out the insufficiency" of the grounds of proposal. Thus, even if the word "specified" had been used in regulation 3(6)(b) instead of "provided" it seems as if some degree of implication or "eking out of the insufficiency" would be permitted. 

34.	The issue in Net Book Agreement (1962) was whether the removal of a restriction would deny to the public "specific and substantial benefits or advantages". It was held that a benefit was specific if it was explicit and definable (not defined). Certain disadvantages emerged from the evidence which the court held were explicit and definable from which it followed that the avoidance of them conferred a specific and substantial benefit. We have not found this authority of assistance to us in interpreting the meaning of the word "provided".   

35.	Thus, having considered the context of regulation 3(6) we are of the view that the use of the word "provided" in one part of the paragraph and the use of the word "specified" in other parts lead to the conclusion that the word "provided" means something different from, and less formal than, the word "specified". 

36.	Mr Peacock next invited us to consider the wider context of regulation 3. First, he argued that regulation 3(6)(a) contained a cross-reference to regulation 3(9) which itself referred to types of securities defined by reference to terms expressly agreed by the parties. Further, regulation 3(9)(a) referred to a specified date and something could not be specified by implication. It followed that the words "it is provided that" in regulation 3(6)(b) referred to an express provision. 

37.	In order to consider these arguments we now set out the terms of regulation 3(9):

" (9)	A debt falls within this paragraph if-
(a)	it is a debt on a deep gain security for the purposes of paragraph 1 of Schedule 11 to the Finance Act 1989 and the amount payable on redemption is payable on one specified date, or
(b)	it is a debt on a qualifying indexed security for the purposes of that paragraph, or
(c)	it is a debt on a deep discount security for the purposes of paragraph 1 of Schedule 4 to the Income and Corporation Taxes Act 1988."

38.	We have considered the relevance of the reference to a specified date above. Schedule 11 of the Finance Act 1989 and paragraph 1 of Schedule 4 of the Income and Corporation Taxes Act 1988 (the 1988 Act) refer to "the terms of issue" of a security. We do not have to decide whether such terms could be express or implied (although usually they will be express) because that is not the phrase that we have to interpret. Also, paragraph 2(6) of Schedule 11 of the Finance Act 1989 refers to something "stated on the face of" a security. That is yet another phrase which is more specific than "the terms of issue". These examples indicate to us that the legislation uses very precise terms and that there are dangers in importing the meaning of one phrase when construing another. Rather the fact that different words and phrases are used indicates that each has a different meaning.  

39.	Mr Peacock then compared regulation 3(6)(b) with regulation 3(8) of the 1994 Regulations and also with regulation 2(10) of the Exchange Gains and Losses (Deferral of Gains and Losses) Regulations 1994 SI 1994 No 3228 (the Deferral Regulations). 

40.	We first set out the provisions of regulation 3(8):

"(8)	For the purposes of this regulation the amount of a debt is fixed if (and only if)-
(a)	it falls within paragraph (9) below, or
(b)	the maximum amount of the principal is specified at the commencement of the tem of the debt and the principal cannot be increased beyond that maximum amount (except as mentioned in paragraph (6)(b)(iii) above.
In determining whether a debt falls within this paragraph there shall be disregarded any term in so far as it provides for the principal or any interest to be calculated by reference to any withholding or other tax (including foreign tax)."

41.	Mr Peacock argued that regulation 3(8) defined a debt of a fixed amount by reference to a specified amount and that required the express agreement of the parties. The words "specified amount" also appeared in regulation 3(6)(b)(i) and so regulation 3(6)(b)(ii) should have the same meaning. We have mentioned above that we do not consider that the word "specified" has the same meaning as the word "provided".

42.	Regulation 2(10) of the Deferral Regulations is somewhat similar to regulation 3(6) of the 1994 Regulations and provides:

"(10)	A debt falls within this paragraph if-
(a)	the maximum amount of the principal is specified at the commencement of the term of the debt and the principal cannot be increased beyond that maximum amount (except as mentioned in sub-paragraph (c) below) , and
(b)	any part of the principal once repaid cannot be withdrawn, and
(c)	any interest which, if not paid when due, is to be capitalised or rolled-up, is to be added to the principal on the due date and repayable on the same terms as the principal. 
In determining whether a debt falls within this paragraph there shall be disregarded any term in so far as it provides for the principal or any interest to be calculated by reference to nay withholding or other tax (including foreign tax.)"

43.	However, there is no reference in regulation 2(10), as there is in paragraph 3(6) of the 1994 Regulations, to "(and only if)" and, more particularly, regulation 2(10) does not contain the words "it is provided that". This leads us to the conclusion that in regulation 3(6)(b) there was a need for some introductory words to introduce the three separate provisions in regulation 3(6)(b) (i), (ii) and (iii) and the rather neutral words of "it is provided that" did just that. Such introductory words were not necessary in Regulation 2(10)(b) which contained only one provision. If we are right then this also leads to the conclusion that the words "it is provided that" import an element of informality.  

44.	Mr Peacock next referred us to three provisions in other parts of the Taxes Act which, he argued, pointed to the conclusion that if the phrase "it is provided that" were to include an implied provision that would have been made clear. The first such provision was in section 840A of the 1988 Act.  That section contains a definition of the word "bank" and we are not clear how it helps Mr Peacock's case. The second such provision is in section 108(1) of the Taxes Management Act 1970 which describes the responsibilities of company officers and refers to a person "as may for the time being have the express, implied or apparent authority of the company to act on its behalf". There the words "express, implied or apparent" define the meaning of the word "authority" and have a technical meaning in that context. They do not help us in interpreting the meaning of the words "it is provided that" in the context of regulation 3(6). The third such provision was in regulations 5 to 8 of the Open Ended Investment Company (Tax) Regulations 1997 SI 1997 No. 1154 (the 1997 Regulations).  These regulations contain modifications of the Taxes Acts and refer to references in the Taxes Acts "whether expressly or by implication." Again those later words define the word "references" and do not assist in interpreting the words "it is provided that". We do not consider that these three provisions support a general conclusion that if a provision may be implied that will be expressly stated in the legislation.

45.	Finally we mention the position of the third loan. It was suggested to us that, in February 1998, part of the principal of the third loan which had been repaid was in fact re-drawn. However, we received no oral evidence about this and, in our view, did not have sufficient evidence to make any findings of fact about it. In any event, even if part of the third loan had been repaid and then re-drawn this would not have altered the fact that under the terms of the loan agreement and the supplemental agreement it was provided that once the principal had been repaid it could not be withdrawn. 

Decision

46.	Our decision on the issue for determination in the appeal is that the application of Chapter II of Part II of the 1993 Act to the loans at issue in the appeal is not delayed. The loans were fixed debts and, in particular, they provided that any part of the principal once repaid could not be withdrawn within the meaning of Regulation 3(6)(b)(ii) of the 1994 Regulations. An express provision was not required under the terms of the regulation. 

47.	The appeal is therefore dismissed.

48.	This is a written decision in principle on one issue in dispute and accordingly we adjourn the making of our final determination under the provisions of Regulation 18(5) of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 SI 1994 No. 1811. 

DR NUALA BRICE

DR DAVID WILLIAMS 

RELEASE DATE:
SC 3063/2002
Anonymised 14.07.03