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Amendment of section 402 (foreign currency: tax treatment of capital allowances and trading losses of a company) of Principal Act.
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53.— Section 402 of the Principal Act is amended—
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(a) in subsection (2), by the insertion of the following after paragraph (b):
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“(c) For the purposes of this subsection, references to an amount of any allowance or charge to be made in taxing a trade shall include a reference to an amount of any allowance or charge to be made by means of discharge or repayment of tax in taxing the leasing activities of a company, where those activities are charged to tax under Case IV of Schedule D and references to a trading expense or receipt shall be construed accordingly.”,
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(b) by the insertion of the following after subsection (3):
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“(4) (a) Subject to paragraph (b), where a company incurs a loss in an accounting period arising from a leasing activity in respect of which the company is within the charge to corporation tax under Case IV of Schedule D and makes a claim under section 399(1) to set that loss off against the amount of any income arising from such activities in respect of which the company is assessed to corporation tax under that Case for the same or any subsequent accounting period, the amount (which may be nil) of any set-off due to the company against that income in an accounting period shall—
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(i) be computed in terms of the company’s functional currency by reference to amounts expressed in that currency, and
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(ii) then be expressed in terms of the currency of the State by reference to the rate of exchange which—
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(I) is used to express in terms of the currency of the State the amount of the income assessed to corporation tax under Case IV for the accounting period in which the loss is to be set off, or
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(II) would be so used if there were such income.
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(b) For the purposes of the computation of any set-off due to a company in accordance with paragraph (a) against income of an accounting period, in respect of a loss arising from a leasing activity in such period, where that loss or any set-off referable to that loss was computed in terms of a currency other than the functional currency of the company for the first-mentioned period, then that loss or set-off, as the case may be, shall be expressed in terms of that functional currency by reference to a rate of exchange of that functional currency for the other currency, being an average of representative rates of exchange of that functional currency for the other currency during the accounting period in which the loss was incurred.”.
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