Finance Act 2000

Valid from 28/07/2000

106 Foreign exchange gains and losses: use of local currency. U.K.

(1) In subsection (2) of section 149 of the M1 Finance Act 1993 (local currency to be used)—

(a) for “trade or trades", in both places where they occur, there shall be substituted “ business or businesses ”; and

(b) for “any such trade" there shall be substituted “ any such business ”.

(2) In subsection (4) of that section—

(a) the words “the asset or contract was held, or the liability was owed, by the company solely for trading purposes and” shall cease to have effect; and

(b) for “sections 125 to 128" there shall be substituted “ sections 125 to 129 ”.

(3) In subsection (5) of that section—

(a) the words “the asset or contract was held, or the liability was owed, by the company solely for trading purposes and” shall cease to have effect;

(b) for “sections 125 to 128" there shall be substituted “ sections 125 to 129 ”; and

(c) for “trade", in both places where it occurs, there shall be substituted “ business ”.

(4) For subsection (6) of that section there shall be substituted—

“(6) In any other case—

(a) sections 125 to 129 above shall be applied by reference to sterling;

(b) those sections shall then be applied separately by reference to each local currency involved (other than sterling); and

(c) any exchange gain or loss of a business or part shall be ignored unless found in the currency which is the local currency of the business or part for the relevant accounting period (whether sterling or otherwise).”.

(5) For subsection (7) of that section there shall be substituted—

“(7) For the purposes of this section a part of a business is any part of a business which is treated for the purposes of section 93 above as if it were a separate business for the relevant accounting period.”.

(6) For subsection (9) of section 128 of the M2 Finance Act 1993 (trading gains and losses) there shall be substituted—

“(9) For the purposes of this section a part of a trade is any part of a trade which is treated for the purposes of section 93 above as if it were a separate business for the relevant accounting period; and the relevant accounting period is the accounting period which constitutes the accrual period concerned or in which that accrual period falls.”.

(7) After section 135 of that Act there shall be inserted—

“135A Sterling used if avoidance of gain is the main benefit.

(1) This section applies where, as regards qualifying assets and liabilities of a company—

(a) a currency other than sterling would (apart from this section) be the local currency for the purposes of sections 125 to 129 above; and

(b) the main benefit that might be expected to accrue from that currency being the local currency is that no net exchange gain would accrue to the company for those purposes.

(2) If a net exchange gain would accrue to the company if sterling were the local currency for the purposes of sections 125 to 129 above, then, as regards the assets and liabilities concerned, sterling shall be the local currency for those purposes.

(3) For the purposes of this section a net exchange gain accrues to a company if its initial exchange gains (as determined in accordance with this Chapter) exceed its initial exchange losses (as so determined).”.

(8) For subsection (12) of section 140 of that Act (deferral of unrealised gains) there shall be substituted—

“(12) For the purposes of this section a part of a trade is any part of a trade which is treated for the purposes of section 93 above as if it were a separate business for the relevant accounting period; and the relevant accounting period is the accounting period which constitutes the second accrual period or in which that accrual period falls.”.

(9) For subsection (2) of section 142 of that Act (deferral non-sterling trades) there shall be substituted—

“(2) For the purposes of subsection (1) above the sterling equivalent of an amount is the sterling equivalent calculated by reference to such rate of exchange as applies by virtue of section 94 above in the case of the profits or losses for the accounting period concerned of the business or part of which the gain or loss is a gain or loss (or would be apart from section 139 above).”.

(10) In subsections (3) and (5) of that section, for “trade", in each place where it occurs, there shall be substituted “ business ”.

(11) For subsection (4) of that section there shall be substituted—

“(4) The amount the company is treated as receiving under section 128(4) or 129(2) above in respect of the accounting period and by virtue of the gain (as reduced) shall be the amount computed and expressed in that currency.”.

(12) In subsection (1) of section 163 of that Act (local currency of a trade), for “trade" there shall be substituted “ business ”.

(13) For subsections (2) and (3) of that section there shall be substituted—

“(2) Where by virtue of section 93 above the profits or losses of a business or part of a business for an accounting period are to be computed and expressed in a currency other than sterling for the purposes of corporation tax, that other currency is the local currency of the business or part for that period.”.

(14) In section 164 of that Act (interpretation: miscellaneous), subsections (6) and (7) shall cease to have effect.

(15) In section 167 of that Act (orders and regulations)—

(a) in subsection (5A), for “the provisions of Chapter II of Part IV of the M3 Finance Act 1996 (loan relationships)" there shall be substituted—

“(a) the provisions of Chapter II of Part IV of the M4 Finance Act 1996 (loan relationships); or

(b) the provisions of sections 105 and 106 of the Finance Act 2000 (use of local currency).”;

(b) in subsection (5B), for “subsection (5A)" there shall be substituted “ subsection (5A)(a) ”; and

(c) after that subsection there shall be inserted—

“(5C) The power to make any such modifications as are mentioned in subsection (5A)(b) above shall be exercisable so as to apply those modifications in relation to any accounting period of a company beginning on or after 1st January 2000.”.

(16) In subsection (4)(b) of section 110 of the M5 Finance Act 1998 (determinations requiring the sanction of the Board), after “section 135," there shall be inserted “ 135A, ”.

(17) This section has effect for accounting periods beginning on or after 1st January 2000 and ending on or after 21st March 2000.

Marginal Citations

M1 1993 c. 34.

M2 1993 c. 34.

M3 1996 c. 8.

M4 1996 c. 8.

M5 1998 c. 36.