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HMRC internal manual

Corporate Finance Manual

Foreign exchange: tax rules on exchange gains and losses: loan relationships and derivative contracts: money debts, provisions, foreign cash

Amounts not arising from the lending of money

Money debts are explained at CFM41000. Examples of such money debts are trade debts, outstanding balances for the purchase of assets, and interest on court judgement debts. CTA09/S481(3)(b) includes exchange gains and losses on money debts which do not arise from the lending of money in the credits and debits taxable under the loan relationships rules.

Foreign cash

Exchange gains and losses are calculated on any amounts of foreign cash held by the company under CTA09/S483(2).


CTA09/S483(3) extends the definition of a money debt to provisions made in respect of future liabilities relating to a trade, property business or an overseas property business.

Provisions for certain types of provision made by an insurance company are also treated as money debts (see the General Insurance Manual GIM5120).

Example: trade debts

On 1 January Basker Ltd sells goods to an Italian firm for €15,000. At the time the goods are delivered €15,000 is worth £10,000. The customer pays the bill on 31 March when €15,000 is worth £10,750.

The company has made an exchange gain of £750. This is a loan relationship credit.

Example: provisions

Opit Ltd has an accounting period ending on 31 December each year. At 31 December the company identifies contingent liabilities based on guarantees provided to US customers. It includes in its accounts a US $ provision against possible future guarantee payments. The provision is translated into sterling for the accounts.

At each accounting date the provision is revalued in US $. It is then translated onto the balance sheet in sterling. There is no lending of money, and no money debt. Without CTA09/S483(3) the company could not include the exchange gain or loss that arises in the tax computation.