This guidance describes the post-FA 2002 taxation of loan
relationships, derivative contracts and FOREX.
FA93/S93 (2) sets out the circumstances in which profits and
losses of a business are computed initially in a foreign currency
and then expressed in sterling. They are where:
| 1. | A UK-resident company
draws up accounts in a foreign currency in accordance with normal
accounting practise.
See CFM7050+ for information on UK incorporated companies that account in foreign currency. The most common currencies used will be the dollar and euro. In addition, some companies incorporated abroad maintain accounts in the currency of the country where they are incorporated or where they do business. They may be resident in the UK for tax purposes because they are controlled and managed in the UK. | |
| 2. | A company is not resident in the UK, but has a UK branch which makes a return of accounts in a non-sterling currency. The non-sterling currency in which it draws up the return of accounts will usually be the company's reporting currency, but it doesn't have to be. | * |
In such cases the accounts or return of accounts will be
wholly drawn up in the foreign currency.
Return of accounts means the foreign currency financial
statements which the UK branch of a non-resident company submits
with its tax return in order to comply with FA98/SCH18/PARA3. In
some cases, of course, non-resident companies have UK branches that
operate relatively independently of the parent company and keep
books and prepare financial statements in sterling. Such branches
will simply submit a return of accounts in sterling and are
therefore unaffected by the currency accounting provisions.
