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HMRC internal manual

International Manual

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Interest imputation: transfer pricing the lender: treatment of exchange differences

Where transfer-pricing rules operate to impute interest (or a higher rate of interest) on the whole of an outward loan, all the exchange rate gains and losses continue to be recognised in full. However, because of CTA09/S447-S452 (previously FA96/SCH9/PARA11A), exchange gains or losses on creditor loan relationships are to be disregarded only where, and to the extent that, the loan fulfils an equity function.

For further information see CFM38100.