This guidance describes the post-FA 2002 taxation of loan
relationships, derivative contracts and FOREX.
As described at
CFM10521, a UK-resident company which
accounts in a non-sterling currency can submit foreign currency
accounts to HMRC and, under FA93/S93, compute its corporation tax
profits or losses in its reporting currency. In the same way, a
non-resident company which is chargeable to CT on the profits of a
UK branch can submit to HMRC a return of accounts for the branch in
the company's reporting currency, and compute taxable profits in
that company.
But to draw up those accounts (or return of accounts for the
UK branch) the company still has to translate into its reporting
currency any receipts, expenses, assets or liabilities that are
denominated in some other currency (including sterling). Exactly
the same principles apply here as in the case of a company that
accounts in sterling (
CFM10511). The exchange rate that the
company uses in its accounts also applies for tax purposes,
provided that it is an arm's length rate for the relevant day.
