In HMRC v Smith & Nephew Overseas and others [2018] UKUT 393 (29 November 2018) the UT found that exchange losses (FA 1996 s 84(1)(a)) were allowable.
Following a change in its functional currency from sterling to US dollars as the result of a company reorganisation Smith and Nephew and its two sister companies claimed foreign exchange losses totalling over $1m arising as a result of the fall in value of the pound against the US dollar. HMRC disallowed the losses.
The first issue was whether the company’s accounts were GAAP compliant for the purpose of FA 1996 s 85A. It was agreed that the group companies had to change their functional currency as a result of the group reorganisation. The question was how to account for that change. They had chosen the ‘foreign operations’ (FO) method which had given rise to the losses. If...
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In HMRC v Smith & Nephew Overseas and others [2018] UKUT 393 (29 November 2018) the UT found that exchange losses (FA 1996 s 84(1)(a)) were allowable.
Following a change in its functional currency from sterling to US dollars as the result of a company reorganisation Smith and Nephew and its two sister companies claimed foreign exchange losses totalling over $1m arising as a result of the fall in value of the pound against the US dollar. HMRC disallowed the losses.
The first issue was whether the company’s accounts were GAAP compliant for the purpose of FA 1996 s 85A. It was agreed that the group companies had to change their functional currency as a result of the group reorganisation. The question was how to account for that change. They had chosen the ‘foreign operations’ (FO) method which had given rise to the losses. If...
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