Commentary on Sections Overview Chapter 11: Tax avoidance Section 694: Exchange gains and losses
1921.This section gives effect in this Part to adjustments or other treatment of exchange gains and losses prescribed by Schedule 28AA to ICTA, further to those in section 693. It is based on paragraph 8(1) and (4) of Schedule 28AA to ICTA and paragraph 27 of Schedule 26 to FA 2002.
1922.Under paragraph 1 of Schedule 28AA to ICTA, a company may be treated as not a party to a derivative contract. The actual exchange gains and losses on that contract are then disregarded. Subsection (3) provides that such exchange gains and losses are also left out of account in determining the credits and debits to be brought into account under this Part.
1923.Schedule 28AA to ICTA may also impute amounts of exchange gains and losses (the “adjusted amount”) calculated on the basis that the parties to the derivative contract are acting at arm’s length although in fact they do not do so. Subsection (5) requires the “adjusted amount” to be brought into account under this Part.