CFM64445 – Accounts established in a foreign currency: rates used for conversion: change of tax calculation currency: the original currency is the pound sterling – HMRC internal manual

CTA10/S14, 15

Loss carry forward

CTA10/S14 deals with the situation where a company, in accordance with UK GAAP:

  • maintains accounts in sterling or has a functional currency in sterling;
  • incurs a loss in an accounting period which is required to be calculated in accordance with UK GAAP; and
  • the loss is carried over to an accounting period in which its tax calculation currency is different.

The loss is first translated into the tax calculation currency at the end of the last period for which the different tax calculation currency applied. Thereafter, it is converted back into sterling at the same rate at which prior period profits are to be converted into sterling, in accordance with CTA10/S11, see CFM64330.

Loss carry forward

CTA10/S15 deals with the situation where a company, in accordance with UK GAAP:

  • maintains accounts in sterling or has a functional currency in sterling;
  • incurs a loss in an accounting period which is required to be calculated in accordance with UK GAAP; and
  • the loss is carried over to an accounting year in which its tax calculation currency is different.

The loss is first converted to the tax calculation currency at the start of the first period for which the different tax calculation currency applies. Thereafter, it is converted back into sterling at the same rate at which subsequent period profits are to be converted into sterling, in accordance with CTA10/S11, see CFM64330.

Periods prior to December 29, 2007

The above guidance applies to accounting periods beginning on or after December 29, 2007, unless an election has been made to defer the start date of the FA09 amendments to the first accounting period beginning on or after July 21, 2009. afterwards, see CFM64480.

For periods beginning on or after 1 January 2005 but before 29 December 2007, once the loss for a period had been converted into pounds sterling, this permanently fixed the amount of pounds sterling that could be carried forward or back.

For more details when a loss is carried forward from a period to which the old rules applied or when a loss is carried forward to a period to which the old rules applied, see CFM64450.

Comments are closed.