Foreign exchange issues

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

Overview of foreign exchange provisions

Foreign exchange (FX) movements are generally taxed following the rules applicable to the underlying income, expenditure, asset or liability on which they arise, broadly as follows:

Capital assets	On a realisation basis (ie on disposal) following the rules applicable to the taxation of chargeable assets ― see the Calculation of corporate capital gains guidance note
Capital liabilities	Outside the scope of corporation tax
Monetary assets and liabilities	As income, on the basis on which they are recognised in the accounts, under the regimes governing loan relationships, relevant non-lending relationships, or derivative contracts in CTA 2009, ss 298–710 (Pt 5–7) ― see the What is a loan relationship?, Taxation of loan relationships and Derivative contracts guidance notes for more detailed background information regarding these regimes

The remainder of this guidance note focuses on FX movements arising on monetary assets and liabilities. Associated HMRC guidance notes can be found in CFM61000.

FX volatility can be costly to businesses if not managed appropriately. Whilst the default position for tax purposes is

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