Corporation Tax Act 2009

606 Exchange gains and losses U.K.

(1) The reference in section 595(3) to the profits and losses arising to a company from its derivative contracts includes a reference to exchange gains and losses so arising.

(2) Subsection (1) is subject to subsections [F1 (2A),] (3) and (4).

[F2 (2A) Subsection (1) does not apply to an exchange gain or loss of an investment company (within the meaning of section 17 of CTA 2010) which would not have arisen but for a change in the company's functional currency (within the meaning of section 17(4) of that Act) as between—

(a) the period of account of the company in which the gain or loss arises, and

(b) a period of account of the company ending in the 12 months immediately preceding that period.]

(3) Subsection (1) does not apply to an exchange gain or loss of a company so far as—

[F3 (a) condition A or B is met, and]

(b) it is recognised in the company's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings.

(4) Subsection (1) does not apply to [F4 an exchange gain or loss of a company so far as—

(a) condition A is met, and

(b) it] is within a description specified for the purpose in regulations made by the Treasury.

[F5 (4A) Condition A is that the exchange gain or loss arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency.

(4B) Condition B is that the exchange gain or loss arises as a result of the translation from one currency to another of the profit or loss of part of the company's business.

(4C) Subsection (4D) applies where—

(a) condition A is met, and

(b) the amount that is recognised in respect of the exchange gain or loss as mentioned in subsection (3)(b) (“the recognised gain or loss”) is not calculated by reference to spot rates of exchange.

(4D) Where this subsection applies—

(a) the recognised gain or loss is to be treated for the purposes of this Part as comprising two separate exchange gains or losses, namely—

(i) an exchange gain or loss calculated by reference to spot rates of exchange, and

(ii) a residual exchange gain or loss, and

(b) subsections (3) and (4) do not have effect in relation to the residual exchange gain or loss.]

[F6 (4E) Subsections (3) and (4) do not have effect to disapply subsection (1) in the case of an exchange gain arising in an accounting period of a company so far as—

(a) the exchange gain arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency,

(b) the derivative contract is part of arrangements that have a one-way exchange effect in relation to the company in the accounting period (see section 606A), and

(c) the arrangements cause the company or any other company to gain a tax advantage (other than a negligible tax advantage).]

(5) The Treasury may by regulations make provision for or in connection with bringing into account in specified circumstances amounts to which subsection (1) does not apply because of subsection (3) or (4).

(6) The reference in subsection (5) to bringing amounts into account is a reference to bringing amounts into account—

(a) for the purposes of this Part as credits or debits arising to a company from its derivative contracts, or

(b) for the purposes of corporation tax on chargeable gains.

(7) The regulations may—

(a) make different provision for different cases, and

(b) make provision subject to an election or to other specified conditions.

(8) For the meaning of references to exchange gains or losses from derivative contracts, see section 705.

Textual Amendments

F1 Word in s. 606(2) inserted (19.7.2011) (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 7(2)

F2 S. 606(2A) inserted (19.7.2011) (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 7(3)

F3 S. 606(3)(a) substituted (with effect in accordance with Sch. 21 para. 11 of the amending Act) by Finance Act 2009 (c. 10), Sch. 21 para. 6(2)

F4 Words in s. 606(4) substituted (with effect in accordance with Sch. 21 para. 11 of the amending Act) by Finance Act 2009 (c. 10), Sch. 21 para. 6(3)

F5 S. 606(4A)-(4D) inserted (with effect in accordance with Sch. 21 para. 11 of the amending Act) by Finance Act 2009 (c. 10), Sch. 21 para. 6(4)

F6 S. 606(4E) inserted (with effect in accordance with Sch. 21 para. 11 of the amending Act) by Finance Act 2009 (c. 10), Sch. 21 para. 6(5)

Modifications etc. (not altering text)

C1 S. 606(3)(4) excluded by SI 2004/3256 reg. 7A(7) (as inserted (with application in accordance with reg. 1(2) of the amending S.I.) by Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2009 (S.I. 2009/1886), regs. 1(1), 5)