Loan relationships—anti-avoidance: foreign exchange gains and losses

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Loan relationships—anti-avoidance: foreign exchange gains and losses
  • FOREX gains and losses—accounting and tax basics
  • Accounting periods beginning on or after 1 January 2016
  • Accounting periods beginning before 1 January 2016
  • FOREX: transactions not at arm's length—debtor relationship rules
  • Debtor loan relationships—transfer pricing adjustments
  • Accounting periods beginning on or after 1 April 2016
  • Debtor loan relationships—distributions on equity notes
  • Equity notes
  • Accounting periods beginning on or after 1 April 2016
  • More...

Loan relationships—anti-avoidance: foreign exchange gains and losses

IP COMPLETION DAY: The Brexit transition period ended at 11pm on 31 December 2020. At this time (referred to in UK law as ‘IP completion day’), transitional arrangements ended and significant changes began to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

The general rule is that the credits (broadly, but not necessarily, profits) and debits (broadly, but not necessarily, losses) arising to a company from its corporate finance transactions which are to be brought into account for tax purposes under the loan relationships regime are computed in accordance with those recognised in determining a company's profit or loss (as disclosed in the company's relevant accounts) for an accounting period in accordance with generally accepted accounting practice (ie the tax follows the accounts).

For more on the basic computational rules that permeate the loan relationships regime, and its general reliance on GAAP, see Practice Note: Taxation of loan relationships.

This general rule is extended to apply to any credits and debits arising in respect of foreign exchange gains and losses (FOREX) gains and losses. As a result, the provisions dealing with the taxation of FOREX gains and losses arising in respect of financing transactions are, broadly, subsumed

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