Corporation Tax Act 2009 section 384

Treatment of exchange gains and losses

Section 384 explains how exchange gains and losses arising in a partnership are treated for corporation tax purposes when a company is a partner, and when certain gains and losses must be brought into account.

• Whether a company partner brings exchange gains and losses into account under the loan relationships rules depends on how those items are treated in the partnership's accounts.
• The disapplication rule in section 328(3) — which normally prevents credits and debits being recognised where gains or losses bypass the profit and loss account — only applies to the extent those amounts appear in the firm's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity, or statement of income and retained earnings.
• Where exchange gains and losses are not recognised in any of those partnership financial statements, the company partner must still bring the corresponding credits and debits into account under the loan relationships rules.
• The practical effect is that exchange gains and losses which bypass the partnership's profit and loss account are caught by the disapplication rule, but any that are not reflected in the partnership's financial statements at all must be brought into account by the company partner.