Revised HMRC guidance on treatment of exchange differences on impaired loan relationships

Revised HMRC guidance on treatment of exchange ...

The revised guidance clarifies the taxation of exchange differences on the impairment of a loan relationship asset.


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HMRC have revised their guidance on the taxation of exchange differences where a loan relationship asset has been impaired. Examples in the previous guidance showed the loan asset being impaired first and then exchange differences being recognised on the ‘good’ part of the debt. With the revised guidance, the first step is to calculate exchange differences on the whole loan and then the retranslated amount is assessed for impairment.

Although the narrative could be clearer, the revised approach is illustrated by comparing the numerical examples in the guidance. This can make a difference, for example, where a connected companies loan relationship is impaired because the impairment provision is not deductible but the exchange differences recognised in the accounts are taxable or allowable.

The revised guidance can be found here.

For further information please contact:

Rob Norris

Mark Eaton 

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