International accountant and shipping consultant Moore Stephens has urged the UK government to remove exchange rate distortions when calculating capital gains on ships.

Moore Stephens tax partner Sue Bill explains, “Currently, all capital gains and losses subject to UK corporation tax are calculated by reference to sterling, with the result that capital gains and losses arising on non-sterling assets, including certain ships, can be significantly distorted by exchange rate fluctuations. For example, even where there is no increase in the dollar or euro value of a ship, a taxable capital gain can arise solely as a result of a fall in the value of sterling.

“In order to avoid such distortions, the UK government has now proposed changes to these rules so that capital gains and losses in some cases can be calculated in a currency other than sterling. Under the proposed changes, where a company has a non-sterling functional currency, capital gains and losses will in future be calculated in the company’s functional currency. But this will only apply to shares and not to physical assets.

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