Commentary on Sections Overview Chapter 13: General and supplementary provisions Section 705: Expressions relating to exchange gains and losses
1954.This section provides for the interpretation of references in this Part to “exchange gains” or “exchange losses” in relation to a company. It is based on paragraph 54(2), (2A) and (3) of Schedule 26 to FA 2002.
1955.Subsection (2) provides that, in the event that the comparison of values described in subsection (1) gives neither a gain nor a loss, an exchange gain of nil arises. This rule applies in a case where it is necessary for there be an amount of an exchange gain or exchange loss for a provision to apply (say, section 694(6)).
1956.Subsection (3) provides powers for the Treasury to make regulations as to the calculation of exchange gains and losses and any other profits, gains or losses if the company uses fair value accounting. See The Loan Relationships and Derivative Contracts (Exchange Gains and Losses using Fair Value Accounting) Regulations 2005 (SI 2005/3422). As in the case of the powers in section 701, regulations made under these powers may apply to any period of account beginning in the year in which they are made.
1957.Subsection (5) sets out what a reference to an exchange gain or loss from a company’s derivative contracts means (for the purposes of, say, section 606(1)).