CFM64445 | Accounts drawn up in a foreign currency: rates used for translation: change in tax calculation currency: original currency is sterling

CTA10/S14, 15

Carry back of losses

CTA10/S14 deals with the case where a company, in accordance with UK GAAP:

• prepares accounts in sterling or has a sterling functional currency;

• incurs a loss in an accounting period that is to be computed in accordance with UK GAAP; and

• the loss is carried back to an accounting period in which its tax calculation currency is different.

The loss is first translated into the tax calculation currency at the end of the last period to which the different tax calculation currency applied. Then, it is translated back to sterling at the same rate at which the profits for the earlier period are to be translated to sterling, in accordance with CTA10/S11, see CFM64330.

Carry forward of losses

CTA10/S15 deals with the case where a company, in accordance with UK GAAP:

• prepares accounts in sterling or has a sterling functional currency;

• incurs a loss in an accounting period that is to be computed in accordance with UK GAAP; and

• the loss is carried forward to an accounting period in which its tax calculation currency is different.

The loss is first translated into the tax calculation currency at the beginning of the first period to which the different tax calculation currency applied. Then, it is translated back to sterling at the same rate at which the profits for the later period are to be translated to sterling, in accordance with CTA10/S11, see CFM64330.

Periods before 29 December 2007

The guidance above applies to accounting periods beginning on or after 29 December 2007, unless an election was made to defer the start date of the FA09 changes to the first accounting period beginning on or after 21 July 2009, see CFM64480.

In periods beginning on or after 1 January 2005 but before 29 December 2007, once the loss for a period had been translated into sterling, that permanently fixed the sterling amount available to carry forward or back.

For details where a loss is carried forward from a period to which the old rules applied or where a loss is carried back to a period to which the old rules applied, see CFM64450.