Foreign currency gains and losses

By Tolley
Corporation_tax_img

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Foreign currency gains and losses
  • General rule
  • Disregarded exchange gains / losses
  • Unallowable items
  • Losses of a non-exempt branch
  • Exchange differences on shares in a subsidiary

A UK company doing business overseas is likely to have to deal with transactions in foreign currencies, leading to foreign exchange movements where the transaction is translated into a sterling equivalent in the accounts.

Foreign exchange gains and losses can arise where the accounts of a branch are consolidated with those of the UK company, where the branch accounts are prepared in a different currency and no election has been made to exempt the branch profits and losses from UK tax (see the Foreign branch exemption ― overview guidance note). For corporation tax purposes, the profits of a UK company, including those arising overseas, or in a permanent establishment, must be computed and expressed in sterling.

CTA 2010, s 5

Exchange gains and losses can also arise:

  • at an accounting period end when there is a difference between the valuation of monetary assets and liabilities:

More on Taxation of foreign income of companies: