CFM64325 - Accounts drawn up in a foreign currency: rates used for translation: translation from sterling to a different currency

CFA10/S10

Companies are required to calculate their taxable profits in a currency other than sterling in certain cases where:

• Accounts drawn up in a foreign currency: where the presentation currency and the functional currency are different (see CFM64120)
• Accounts drawn up in a foreign currency: UK-resident company where the presentation currency and the functional currency are the same (see CFM64130)
• Accounts drawn up in a foreign currency: Non-UK resident company prepares a return of accounts in a currency other than sterling (see CFM64140)

In these cases, it may be necessary to translate a sterling amount mentioned in the Corporation Tax Acts into a foreign currency. That amount might be, say, a threshold amount that impacts the computation of taxable profits.

The approach that applies in these cases is set out in S10. The translation must be made either at:

• The average rate for the accounting period;
• In the case of a single transaction, an appropriate spot exchange rate for the transaction; or
• In the case of an amount relating to more than one transaction, a rate of exchange derived on a just and reasonable basis from spot rates.