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Loss on currency hedge - tax treatment

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Mr Smith purchases £50,000 of using say $100,000 on 1/1/2014.

Brexit comes along and all of a sudden on 1/1/17 Mr Smith realises he only needed $70,000 to acquire £50,000.

He cancels the option and takes a hit of $30,000 (i.e. $30,000 at .7142857 = £21,429).

I believe that this loss is capital in nature (please let me know if I'm wrong) but I am unsure how this would be shown on a return.

Any help or suggestions would be greatly appreciated.

 

 

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By michaelblake
18th Dec 2017 22:31

If the contracts are being used as part of a trading venture the treatment is here
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim39570

If there is no trade HMRC are likely to regard the transaction as on a par with gambling

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56004

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim39570

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