Beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Foreign exchange: gains or losses: capital or revenue: terms of borrowing

A capital borrowing is one that is:

  • not temporary, and
  • fixed in amount, and
  • available for use for any of the trader’s activities and not merely the day to day trading operations.

A revenue borrowing is one which:

  • is temporary, and
  • fluctuates (that is, it is akin to a bank overdraft facility), and
  • is incurred as an incident of the ordinary day to day carrying on of the business activities.

Interpretation: temporary borrowings

You should generally accept a period of less than a year as temporary and a period of a year or more as not temporary. This is a general guide only and not a rule to be applied rigidly.

For example, fixed amount borrowings for a period of less than a year which are systematically renewed may constitute an addition to capital. On the other hand a borrowing for more than a year which is used to meet some temporary exceptional trading expense may be on revenue account.

Lord Templeman considered in Beauchamp v F W Woolworth plc [1989] 61TC542 that to be on revenue account a borrowing must be ‘fluctuating’. It is not, however, entirely clear that previous authorities regarded this characteristic as necessarily being a condition for treating a borrowing as revenue. In practice HMRC will normally accept that short-term borrowing, incurred in connection with day-to-day trading operations, is not debarred from being on revenue account solely because it is fixed in amount.