Part 2Calculation of liability in respect of profits

Chapter 4Currency

Translating amounts into other currencies

12Sterling equivalents: carried-back amounts

(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—

  1. (a)

    the later tax calculation currency is not the same as the earlier tax calculation currency, and

  2. (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—

  1. (a)

    the later tax calculation currency is not the same as the earlier tax calculation currency, and

  2. (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—

  1. (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

  2. (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.