Corporation Tax Act 2009 section 705

Expressions relating to exchange gains and losses

Section 705 defines what is meant by exchange gains and exchange losses for the purposes of the derivative contracts rules, and gives the Treasury power to make regulations about how these are calculated.

• An exchange gain or loss arises when a company compares, at different times, the value of an asset or liability expressed in one currency against its valuation in another currency — a gain being a profit from that comparison and a loss being the opposite
• Where the comparison produces neither a gain nor a loss, the legislation treats this as an exchange gain of nil, ensuring that provisions which require an exchange gain or loss amount to exist can still operate
• The Treasury has the power to make regulations prescribing how exchange gains and losses are to be calculated, and these regulations can apply retrospectively to accounting periods beginning in the same calendar year in which the regulations are made
• A reference to an exchange gain or loss from a company's derivative contract simply means an exchange gain or loss that arises to that company in connection with one of its derivative contracts