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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: The CFC Charge Gateway Chapter 9 - Exemptions for profits from Qualifying Loan Relationships: How do you determine the profits of a Qualifying Loan Relationship: FOREX gains and losses

While TIOPA10/Part 9A/S371IF provides for FOREX gains and losses of creditor and debtor loan relationships to be included in the calculation of the profits of a qualifying loan relationship (“QLR” - INTM217000), those FOREX gains and losses actually have to form part of the non trading finance profits (“NTFPs” - INTM203000) of the CFC in the first place. The NTFPs are derived from the assumed total profits of the CFC, which is essentially the UK tax measure of the profits of the CFC. It is unusual for FOREX gains and losses to be included as loan relationship credits and debits as they are generally disregarded under specific rules or form a hedge for accounting purposes and so aren’t taken into account for the purpose of loan relationship rules.