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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
, see all updates

Foreign exchange: accounts drawn up in a foreign currency: losses

Amounts brought forward from earlier accounting periods such as losses

Where CTA10/S7, S8 or S9 applies, CT losses, as well as profits, must be translated into sterling after being calculated in the non-sterling functional currency. This means that all

  • trading losses,
  • non-trading loan relationship deficits, and
  • management expenses

of that period are relieved in sterling.

CFM64161 and CFM64162 outline the methods for arriving at the losses to be carried back against earlier periods or carried forward for use against future profits. The methods outlined are different to the previous regime (CFM86100) when these amounts were brought forward and carried back in the functional currency.

Where a company has amounts brought forward in a foreign currency under the previous regime, these should be translated back into sterling at the spot rate on the last day of the final accounting period under the old rules. That is the accounting period immediately before the accounting period beginning on or after 1 January 2005. The transition rule is at FA04/SCH10/PARA79.