CG78335 - Currency: foreign currency loans

Where a loan is received in foreign currency there is an acquisition of that currency for a consideration equal to its sterling value at that time. A chargeable gain or allowable loss may arise on the disposal of that currency, for example, when it is used to purchase an asset, see CG78310 - CG78314. When in due course foreign currency is used to repay the loan, there is a disposal of that currency for proceeds equal to its sterling value on repayment. Again, a chargeable gain or allowable loss may arise on the currency which is disposed of when the loan is repaid.

From the point of view of the borrower, the loan itself is a liability, not an asset. It follows that any loss on the loan incurred by the borrower, perhaps because of movements in the rates of exchange of the foreign currency into sterling between the receipt of the loan and its repayment, is not allowable for capital gains purposes.