Taxes Consolidation Act 1997 section 80

Taxation of certain foreign currencies

Section 80 provides that foreign currency exchange gains or losses arising on certain high-interest "section 130" loans denominated in a foreign currency are treated as trading profits or losses of the borrower's trade.

• A "section 130" loan (referred to as "relevant principal") is a loan advanced by a lending company where the interest is treated as a distribution of profits rather than a trading expense, meaning it is not tax-deductible for the borrower and not taxable for the lender.
• A loan is a "relevant liability" if it is denominated in a foreign currency and carries an interest rate exceeding 80% of the three-month European Interbank Offered Rate (the "specified rate"), as recorded by the Central Bank of Ireland.
• Any foreign exchange gain or loss arising to the borrower in connection with a relevant liability is deemed to be a profit or loss of the borrower's trade in which the loan funds are used, regardless of what other provisions of the Tax Acts or Capital Gains Tax Acts might otherwise apply.
• By virtue of section 443(18), where the borrower's trade qualifies for manufacturing relief, such gains are regarded as amounts receivable from the sale of goods and accordingly taxed at the 10% corporation tax rate rather than the standard corporation tax rate or the capital gains tax rate.