Corporation Tax Act 2009

694 Exchange gains and losses

(1) Subsections (2) to (7) apply if—

(a) a company is a party to a derivative contract in an accounting period, and

(b) an exchange gain or exchange loss arises to the company for the accounting period from the contract.

(2) Subsection (3) applies if as a result of Schedule 28AA to ICTA (provision not at arm’s length) the company’s profits and losses are calculated for tax purposes as if it were not a party to the contract.

(3) Any exchange gains or losses which arise to the company from the contract for the accounting period are left out of account in determining the credits and debits to be brought into account in accordance with this Part.

(4) Subsection (5) applies if as a result of Schedule 28AA to ICTA the company’s profits and losses are calculated for tax purposes as if the terms of the contract were those which would have been agreed by the company and the other party to the contract had they been dealing at arm’s length (“the arm’s length terms”).

(5) The credits and debits which are to be brought into account in accordance with this Part in the case of the company are to be determined on the assumption that the amount of any exchange gain or loss arising to the company from the contract in the accounting period is the adjusted amount.

(6) In subsection (5), the “adjusted amount” means the amount of an exchange gain or loss which would have arisen from the contract if its terms were the arm’s length terms.

(7) That amount may be nil.

(8) Nothing in Schedule 28AA to ICTA requires the amounts brought into account in accordance with this Part in respect of exchange gains and losses from derivative contracts to be calculated on the assumption that the arm’s length provision had been made instead of the actual provision.

(9) But subsection (8) does not affect the application of—

(a) subsection (3) under subsection (2), or

(b) subsection (5) under subsection (4).

(10) In subsection (8) “the actual provision” and “the arm’s length provision” have the same meaning as in Schedule 28AA to ICTA (see paragraph 1 of that Schedule).