Overview of foreign exchange provisions
Foreign exchange (FX) movements are generally taxed following the rules applicable to the underlying income, expenditure, asset or liability on which they arise, broadly as follows:
| Capital assets | On a realisation basis (ie on disposal) following the rules applicable to the taxation of chargeable assets ― see the Calculation of corporate capital gains guidance note |
| Capital liabilities | Outside the scope of corporation tax |
| Monetary assets and liabilities | As income, on the basis on which they are recognised in the accounts, under the regimes governing loan relationships, relevant non-lending relationships, or derivative contracts in CTA 2009, ss 298–710 (Pt 5–7) ― see the What is a loan relationship?, Taxation of loan relationships and Derivative contracts guidance notes for more detailed background information regarding these regimes |
The remainder of this guidance note focuses on FX movements arising on monetary assets and liabilities. Associated HMRC guidance notes can be found in CFM61000.
FX volatility can be costly to businesses if not managed appropriately. Whilst the default position for tax purposes is
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