Budget 2009 – Foreign corporation tax losses
As expected, changes have been announced to the way companies calculate corporation tax losses where the companies account for profits in a currency other than sterling. The rules will apply where companies carry forward losses to future accounting periods or carry back losses to previous accounting periods.
This change means that the exchange rate that is used for conversion of losses into sterling will be the same as is used for conversion of profits. This will prevent exchange gains and losses arising when losses are offset after the exchange rate has moved. These changes were first announced last year and the changes will apply for all accounting periods which commenced on or after 29 December 2007.
Businesses that are adversely affected by this measure can make an election to defer the commencement date of this measure to accounting periods on beginning on or after the date the Finance Bill 2009 receives Royal Assent.
This measure will help remove anomalies due to volatile foreign exchange rates.