In Smith and Nephew Overseas (and 2 others) v HMRC [2017] TC05644 accounting exchange losses arising from a change in the group’s functional currency were allowed for tax.

  • Following a reorganisation the group changed its functional currency from £ to $. This resulted in a $1million exchange loss.
  • The taxpayers’ expert witnesses confirmed that its accounts gave a true and fair view and complied with GAAP.
  • HMRC argued there was no tax relief for accounting losses when there was no change to the actual assets.

The tribunal disagreed with HMRC and the losses were allowed.


The decision contrasts to the outcome of GDF Suez Teeside [2017] UKUT 068 where a scheme designed to exploit accounting mismatches under the loan relationship rules produced different results for a transferor and transferee and the tribunal ruled against the taxpayer. 

Useful guides


Case link

Smith and Nephew Overseas Limited, TP Limited and Smith and Nephew Finance Holdings Limited v HMTC


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