Paymaster general Dawn Primarolo announced today that the government would bring forward the necessary legislation in the next Finance Bill.
At present the UK tax system normally requires taxable profits to be computed in sterling, although a company is allowed to elect to have its taxable trading profits based on the profits computed in the foreign currency.
In future, if the accounts are drawn up in a foreign currency the taxable profits will usually be based on the foreign currency profits.
This change, a Revenue statement said today, will make the UK an even more attractive base for international companies.
Legislation will be included in the next Finance Bill which will
provide for the existing rules for using foreign currency profits as the basis for computing taxable profits (called a local currency election) to be extended to activities other than trades
allow all companies to follow their accounting treatment for tax without having to make an election
allow capital allowances, trading losses and losses from property business to be computed in a currency other than sterling
The new rules will apply for accounting periods beginning on or after 1 January 2000.
Companies which currently could make an election for local currency treatment but which have not done so will be allowed a further year using the current rules if they wish.
Draft legislation will be published for consultation before the Budget.