CFM64130 | Foreign exchange: accounts drawn up in a foreign currency: UK-resident company where the presentation currency and the functional currency are the same

CTA10/S8

The basic rule is that the profits of a company should be calculated in sterling for the purposes of corporation tax. However, there are certain exceptions that can apply to the basic rule.

CTA10/S8 applies to UK-resident companies in cases falling outside CTA10/S5, S6 or S7. It deals with the normal foreign currency accounts case where the functional currency is not sterling and the presentation currency of the company is the same as the functional currency.

The profit or loss in the foreign currency after capital allowances and adjustments made under the Corporation Tax rules is computed in the company’s functional currency. The sterling equivalent is then computed in accordance with S11. This will normally be at the average rate for the period. For more on the rate to be used see CFM64310+.