OT20322 - Corporation Tax General

Currency Differences. Possible Scenarios.

There are three possible general scenarios

(1) The PRT conversion basis is the same as that used to convert sales in the CT accounts

(2) The PRT conversion basis is the same as that used to convert receipts in the CT accounts

(3) The PRT conversion basis is different from either of those used in the CT accounts.

The treatment which OTO considers appropriate to each of these cases is as follows

Scenario 1

As the PRT market value (MV) is computed on the same basis as the CT sales figure, there can be a straight substitution of MV for sales proceeds. Any exchange differences will be dealt with on the normal basis through the profit and loss account.

Scenario 2

The MV mirrors the receipts and will therefore to some extent take into account the exchange differences between the accounts figures for sales and receipts. Consequently, if the ICTA88\s493 adjustment is made solely on the sales figures there will be a certain amount of double counting of those differences. MV is therefore substituted for the sales figures as adjusted for exchange differences, thereby dealing with the differences only once.

Scenario 3

It is not possible in this instance to generalise about the amount of any possible double counting of exchange differences. The treatment adopted is to adjust sales only (as in Scenario 1) on the basis that, taking one year with another, any double counting should even out. OTO is however prepared to make the adjustment in Scenario 2 if the company can specifically identify all of the exchange differences involved.