INTM601260 - Transfer of assets abroad: The income charge: Measure of income - profit on exchange

If the accounts of a person abroad show a profit on exchange, this should not be treated as income of the person abroad for the purposes of the income charge. The profit usually derives from a difference between the exchange rates in force

• when the income is credited in the accounts of the person abroad, and
• when that income is actually remitted to the person abroad, or if not remitted, at the date to which the accounts are made up.

The income as it arises to the person abroad is to be deemed to be that of the individual (Lord Chetwode v CIR, 51 TC 647), and we are therefore concerned only with the exchange rates in force at the time when the income is receivable by the person abroad. A profit on exchange is merely a book-keeping entry necessary to ensure that the cash position of the person abroad tallies with the income actually remitted, or which could be remitted at the date at which the accounts are made up.

On the same basis, any loss on exchange should not reduce the income of person abroad in arriving at the income charge.