[CFM61140] CFM61140 – Foreign exchange: tax rules on exchange gains and losses: loan relationships and derivative contracts: exchange differences in reserves
Exchange differences in reserves
Where exchange differences arising from a loan relationship or derivative contract are recognised in reserves, these amounts are not brought into account for tax. This follows the general rule at CTA09/S308.
CTA09/S328(3) provides for amounts arising on the retranslation of a business from its functional currency to another currency which are taken to other comprehensive income (OCI). Under the general rule such amounts will not be brought into account when initially recognised in OCI but they are also not to be brought into account where they are subsequently recycled to profit or loss.