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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
, see all updates

Foreign exchange: tax rules on exchange gains and losses: loan relationships and derivative contracts

Exchange differences on loan relationships and derivative contracts

The effect of CTA09/S328 and CTA09/S606 is that debits and credits calculated, respectively, under the loan relationships and derivative contracts rules include exchange gains or losses on those loan relationships and derivative contracts. ‘Loan relationship’ here includes the extended definition of money debts not arising from the lending of money, certain provisions, and foreign cash. CFM61090.

Exchange gains and losses may arise on both amounts payable in a foreign currency, and any outstanding capital balance in the foreign currency (but see CFM61180 where a loan relationship is a hybrid instrument).