The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Foreign exchange (FX) movements are generally taxed following the rules applicable to the underlying income, expenditure, asset or liability on which they arise, broadly as follows:
The remainder of this guidance note focuses on FX movements arising on monetary assets and liabilities. Associated HMRC guidance notes can be found in CFM61000.
FX differences are translation differences and should not be confused with fair value movements, as the tax treatment applicable to each is not always the same.
An FX gain / loss is the difference between the carrying value of an asset / liability denominated in one currency when translated into a second currency at two different points in time. Items are typically (re)translated when the transaction is entered into or settled, and at any balance sheet dates in between. Examples of how to calculate FX movements are provided in CFM61040.
A fair value gain / loss arises when the fair market value of an asset / liability changes and its balance sheet carrying value is adjusted accordingly, especially under the principles of IFRS and modified UK GAAP.
In practice the term ‘revalued’ is often used interchangeably to mean either process, but it is important to distinguish them when evaluating the availability of some tax reliefs.
Where companies follow an amortised cost (or accruals) basis of accounting, translation differences are identified as
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