In my Budget speech last year, I referred to the question of tax relief for the extra cost to companies of repaying foreign currency loans where sterling has fallen in value. I have now considered this question fully in the light of the report I have received of the extensive discussions the Inland Revenue subsequently had with those affected.
As I made clear last year, the arguments for general relief for exchange losses are finely balanced. There are major areas where the balance of argument would be against relief, and in these areas there are real problems in distinguishing between different cases and in drawing lines between them. Moreover, although the recovery of sterling has reduced potential losses, the sums of tax at stake are considerable. I have had to conclude that, since this year there is an urgent need to concentrate on income tax reliefs, I cannot at the same time propose relief for exchange losses.