In a hearing (Smith & Nephew Overseas Ltd & others v HMRC) at the First-Tier Tribunal (FTT) it was held that a forex loss arising on sterling receivables following a change from a sterling to US dollar “local” currency (under old UK GAAP - SAAP 20) was allowable.
HMRC ran three arguments to try to disallow the loss: (1) that the accounts were not GAAP compliant; (2) that the exchange difference was not an “exchange loss”; and (3) that the loss did not “fairly represent” a loss. The FTT held in favour of the taxpayer on all three.