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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Accounts drawn up in a foreign currency: FA 2009: the basic rule

The basic rule

This guidance applies to accounting periods beginning on or after 29 December 2007

Legislation brought in by FA2009 at FA93/S92DA and FA93DB means that unless a company changes the currency in which it computes it taxable profits and losses, any non-sterling losses will, effectively, be carried forward or back in the currency that they originated.

It achieves this by ensuring that the exchange rate used for translating carried forward or back losses into sterling will be the same exchange rate as the rate used to translate the profits during the period of offset into sterling.

The rate that is used to translate both the profits and the losses that have been carried into the accounting period will be the ‘appropriate exchange rate’ as defined in FA93/S92E. CFM64340 has further information on the ‘appropriate exchange rate’.

Further details on how to translate carry back losses into sterling are at CFM64350 to CFM64370.

Further details on how to translate carry forward losses into sterling are at CFM64380 to CFM64400.

There are special rules to deal with the situation when a company has losses that originated in one currency but are offset against profits in an accounting period where those profits are computed in a different currency. CFM64420 has further details.

Similarly, there are special rules to deal with the situation when a company has losses that originated in sterling but are offset against profits in an accounting period where those profits are computed in a non-sterling currency (FA93/S92DC and S92DD). CFM64410has further details.