Part 2 U.K. Calculation of liability in respect of profits

Chapter 4 U.K. Currency

Translating amounts into other currencies U.K.

10 The equivalent in another currency of a sterling amount U.K.

(1) Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(3), 8(3) or 9(3) requires a sterling amount to be translated into its equivalent expressed in another currency.

(2) The translation must be made by reference to—

(a) the average exchange rate for the accounting period, or

(b) the rate mentioned in subsection (3).

(3) That rate is—

(a) if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b) if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

11 Sterling equivalents: basic rule U.K.

(1) Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(2), 8(2) or 9(2) requires a profit or loss to be translated into its sterling equivalent.

(2) The translation must be made by reference to—

(a) the average exchange rate for the accounting period, or

(b) the rate mentioned in subsection (3).

(3) That rate is—

(a) if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b) if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

(4) Subsection (2) is subject to sections 12 and 13 (special rules where the translation is for the purpose of calculating carried-forward or carried-back amounts).

12 Sterling equivalents: carried-back amounts U.K.

(1) This section applies if, for the purpose of calculating a carried-back amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2) The translation must be made in accordance with whichever of the rules 1, 2 and 3 is applicable (see the table below).

Rule 1 applies if the later tax calculation currency is the same as the earlier tax calculation currency.	Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.
Rule 2 applies if— (a) the later tax calculation currency is not the same as the earlier tax calculation currency, and (b) the earlier tax calculation currency is sterling.	Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the last day of the relevant accounting period.
Rule 3 applies if— (a) the later tax calculation currency is not the same as the earlier tax calculation currency, and (b) the earlier tax calculation currency is a currency other than sterling.	Rule 3 is that the loss must be translated into its sterling equivalent by— (a) being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and (b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(3) In the table in subsection (2)—

• “the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-back amount is to be carried back,

• “the later tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises, and

• “the relevant accounting period” means the latest accounting period of the company that both—

  (a)

  ends before the accounting period in which the loss arises, and

  (b)

  is a period in which the tax calculation currency of the company is the same as the earlier tax calculation currency.

13 Sterling equivalents: carried-forward amounts U.K.

(1) This section applies if, for the purpose of calculating a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2) The translation must be made in accordance with whichever of rules 1, 2 and 3 is applicable (see the table below).

Rule 1 applies if the earlier tax calculation currency is the same as the later tax calculation currency.	Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.
Rule 2 applies if— (a) the earlier tax calculation currency is not the same as the later tax calculation currency, and (b) the later tax calculation currency is sterling.	Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the first day of the relevant accounting period.
Rule 3 applies if— (a) the earlier tax calculation currency is not the same as the later tax calculation currency, and (b) the later tax calculation currency is a currency other than sterling.	Rule 3 is that the loss must be translated into its sterling equivalent by— (a) being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and (b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(3) In the table in subsection (2)—

• “the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises,

• “the later tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-forward amount is to be carried forward, and

• “the relevant accounting period” means the earliest accounting period of the company that both—

  (a)

  begins after the accounting period in which the loss arises, and

  (b)

  is a period in which the tax calculation currency of the company is the same as the later tax calculation currency.