Textual Amendments
F1Pt. 13 Ch. 5F inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2)
(1)A derivative contract entered into for the purposes of an investment scheme is an investment, subject to the following provisions of this section.
(2)The value invested in the derivative contract isβ
(a)where the contract is an option, the cost of acquiring the option (whether from the grantor or another person),
(b)where the contract is a future, the price specified in the contract for the underlying subject matter, or
(c)where the contract is a contract for differences, the notional principal of the contract.
(3)But where entering into a derivative contract constitutes a deemed disposal of an investment or part of an investment by virtue of section 809FZD(2)(a)(ii)β
(a)the derivative contract is not an investment, and
(b)the subsequent disposal of the derivative contract without a corresponding disposal of the investment or part investment is to be regarded as the making of a new investment to the extent that the scheme becomes materially exposed to risks and rewards in respect of the investment or part investment.
(4)For the purposes of this Chapter, references to disposal, in the case of a derivative contract, include any of the following events (to the extent that the event is not otherwise a disposal under section 809FZD(1) or (2))β
(a)the expiry of the contract,
(b)the termination of the contract (whether or not in accordance with its terms),
(c)the disposal, substantial variation, loss or cancellation of the investment scheme's rights under the contract, and
(d)in the case of a derivative contract which is an option, the exercise of the option,
but do not include the renewal of the contract with the same counterparty on substantially the same terms.
(5)The substantial variation of an investment scheme's rights under a derivative contract constitutes (in addition to the disposal of the contract as originally entered into (see subsection (4)(c)) a new investment consisting of the contract as varied.]