Foreign exchange gains and losses and Corporation Tax for a limited company
Short version. Foreign exchange differences on a company's loan relationships, money debts or foreign cash can be Corporation Tax credits or debits. The tax treatment depends on whether the balance is held for the trade or for a non-trading purpose.
1. Trading or non-trading
HMRC includes qualifying exchange gains and losses in the loan relationship rules. Amounts held for trade purposes form part of the trade result. Non-trading amounts join other non-trading credits and debits. Some differences, including certain amounts recognised outside profit or loss, follow different rules. This is general guidance, so check which rule applies to each balance.
2. How the CT600 treats the amount
If non-trading credits exceed debits, the net amount can appear in CT600 box 170. If debits exceed credits, the deficit appears in box 795. Relief against available profits of the same period appears in box 260. A gain included in the accounts row labelled 205 Income not falling under any other heading is still identified separately for the non-trading calculation. This avoids treating it as CT600 box 205 taxable income as well.
For a fictional example, £300 of non-trading exchange gains and £100 of non-trading exchange losses produce a £200 net non-trading loan relationship profit, before any other credits or debits. The accounts still record the original gain and loss. Calling the loss interest or adding it back as disallowable would misdescribe its source.
For the exact SimpleCompanyTax fields, read where to enter a foreign exchange loss on a CT600. The service uses day apportionment when one accounting period needs two Corporation Tax returns, so check each return.