CFM10502 - Currency transactions and accounting: introduction

When to use this guidance

This guidance describes the post-FA 2002 taxation of loan relationships, derivative contracts and FOREX.

The guidance at CFM10511+ on the exchange rate to be used when a company translates financial items for tax purposes applies to all companies drawing up accounts in sterling.

Where a UK-resident company (whether or not incorporated in the UK) prepares accounts in a non-sterling currency, or the UK branch of a non-resident company submits branch accounts in a foreign currency with its CT return, you need to look at the currency accounting guidance, beginning at CFM10520+.

A company (or the UK branch of a non-resident company) may have a part of its business that keeps accounting records and prepares financial statements in a currency other than sterling. (The part business may be formally set up as a branch, but does not have to be.) The company or UK branch may account in sterling. Alternatively, its reporting currency may be a non-sterling currency. The four possibilities are illustrated below.

Where any of these situations apply, you need to look at the currency transaction guidance at CFM10513+.