CFM64140 - Foreign exchange: Non-UK resident company prepares a return of accounts in a currency other than sterling
CTA10/S9
CTA10/S9 deals with the case where the starting point for the preparation of the corporation tax computations is a “return of accounts” drawn up in a currency other than sterling.
It applies in cases where a non-resident company is within the charge to corporation tax. This will be relevant where:
- A non-resident company carries on a trade through a UK permanent establishment (CTA09/S5(2)(b)).
- A non-resident company makes profits from dealing in or developing UK land (CTA09/S5(2)(a), as extended in S5B). This extension to the scope of CT to companies carrying on activities not amounting to trading through a UK permanent establishment has had effect for disposals taking place on or after 5 July 2016.
- A non-resident company carries on a UK property business or has certain other income linked to land in the UK (CTA09/S5(2)(c)/(d), as expanded in S5(3A) and (3B)). This extension to the scope of CT has applied from 6 April 2020.
What is a return of accounts?
A “return of accounts” is defined in CTA10/S9(4) as such accounts as may be required under FA98/SCH18/PARA3 (company tax returns). For further detail see the COTAX manual at COM130010. This deals, in particular, with therequirements as regards non-resident companies trading in the UK through a permanent establishment or agency, non-resident companies receiving income from UK property, non-resident companies disposing of an interest in UK land or property and offshore property developers.
The position as regards the calculation of chargeable gains of a non-resident company which directly or indirectly disposes of interests in UK land on or after 6 April 2019 generally follows the calculation of chargeable gains in a foreign currency, see CFM64180.
Translation of profits or losses into sterling
The currency in which the return of accounts is drawn up (in effect the presentation currency) will determine the currency in which its corporation tax liabilities are to be computed.
The profits and losses of the permanent establishment, after capital allowances and any other adjustments required by the Corporation Tax Acts, are calculated in the foreign currency.
This is then translated to sterling in accordance with S11. This will normally be at the average rate for the period. For more on the rate to be used see CFM64310+.
Periods before 6 April 2020
The scope of S9 was widened in FA19 to tie in with the expansion of the scope of CT to include non-resident companies carrying on a UK property business or with certain other income linked to UK land.
Prior to 6 April 2020, S9 was limited in application to cases where a non-resident company carried on a trade in the UK through a permanent establishment in the UK.
For those earlier periods, the legislation referred specifically to the accounts of the company’s permanent establishment in the UK, which were so required. Accordingly, any gains from dealing in or developing UK land, to which CTA09/S5(2)(a) and S5B applied, fell to be computed in sterling.