Corporation Tax Act 2010 section 12

Sterling equivalents: carried-back amounts

Section 12 sets out how a loss must be converted into sterling when it is being carried back to an earlier accounting period, where the company's tax calculation currency requires such a conversion under sections 7(2), 8(2) or 9(2).

• Where the company's tax calculation currency has not changed between the loss period and the carry-back period, the loss is converted to sterling at the same exchange rate used to convert the profit it is being set against (Rule 1).
• Where the tax calculation currency has changed and the earlier period's currency was sterling, the loss is converted using the spot exchange rate on the last day of the most recent accounting period in which the company still used sterling (Rule 2).
• Where the tax calculation currency has changed and the earlier period's currency was a non-sterling foreign currency, the loss is first converted into that earlier currency at the spot rate for the last day of the most recent period using that currency, and then converted from that currency into sterling at the same rate used for the profit being offset (Rule 3).
• The "relevant accounting period" used in Rules 2 and 3 is the latest accounting period ending before the loss period in which the company's tax calculation currency was the same as that of the carry-back period.

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