Exchange differences on shares and Corporation Tax for a small limited company
Short version. HMRC treatment of exchange differences on company shareholdings, the exceptions and why an FX or unrealised label alone does not establish the tax result.
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An exchange movement on shares held as an investment is not automatically ordinary taxable income. The shareholding and transaction determine the treatment, not the description in a ledger.
The ordinary shareholding case
HMRC generally brings exchange differences on shares held by a company into the capital gain or loss on disposal. Its CFM61150 guidance on exchange differences on shares also sets out exceptions. Read them before applying that general position.
Exceptions and different transactions
- Shares treated as creditor loan relationships under the shares-as-debt rules produce fair-value credits and debits that include exchange differences.
- A foreign-currency share repo treated as a money debt under CTA 2009 Part 6 Chapter 10 gives loan-relationship credits or debits. See HMRC's repo guidance.
- Shares held as trading stock by a bank or financial trader contribute exchange differences to trading profits, outside the loan-relationships regime.
- A company's own foreign-currency share capital normally gives no tax credit or debit unless it falls within loan relationships, for example perpetual debt. Related hedges may fall under matching rules. CFM61150 links to those rules.
A label cannot make the choice
“FX”, “unrealised” and “not a loan relationship” are not sufficient instructions for a filing service to classify a movement. Establish which transaction the accounts describe and which treatment the company has adopted. This article concerns shares. It does not give a general exemption for foreign-currency bank balances, loans or trading receipts.
Keep the accounts figure when recording an adjustment
If your prepared accounts contain a credit and your adopted treatment excludes it from taxable other income, the computation should show the difference. Do not replace the credit with an unrelated expense or loss claim.
SimpleCompanyTax records that treatment through an optional adjustment to the other-income row. Our other income not taxable guide shows the steps and optional explanation. It does not decide whether your particular exchange movement qualifies. This is general guidance, not tax advice.