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17 June 2014
The tax treatment and possible advantages of foreign exchange transactions
My client takes foreign currency positions in a variety of ways. These include the following examples.
- Forward contracts within an investment portfolio. The contracts are closed before expiry with an equal and opposite position. The trade is settled in sterling with the counterparty and there are no movements on foreign currency bank accounts.
- Forward contracts with his bank. The contracts are fulfilled ie on expiry and the foreign currency transfers take place between his foreign currency accounts held with the bank.
My analysis is that in the first situation any gain or loss is a chargeable capital gain under TCGA 1992 s 143.
However in the second situation TCGA 1992 s 252 applies to exempt the gain or loss. I would be grateful to any readers who can either agree with or pick holes in...
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