Income Tax (Trading and Other Income) Act 2005

560 Production of guaranteed returns

(1) For the purposes of this Chapter, a guaranteed return is produced from a disposal of a future or option if risks from fluctuations in the underlying subject matter are so eliminated or reduced as to produce a return from the disposal that meets conditions A and B.

(2) If there is more than one such disposal, a guaranteed return is produced from them if, taking them together, such risks are so eliminated or reduced.

(3) Condition A is that the amount of the return is not to any significant extent attributable (otherwise than incidentally) to any such fluctuations.

(4) Condition B is that the return equates, in substance, to the return on an investment of money at interest.

(5) For the purposes of subsections (1) and (2), the cases where risks from fluctuations in the underlying subject matter are eliminated or reduced include any case where the main reason or one of the main reasons for the choice of that subject matter is—

(a) that there appears to be no risk that it will fluctuate, or

(b) that the risk that it will do so appears insignificant.

(6) In this section the references, in relation to a disposal of a future or option, to the underlying subject matter are references to, or to the value of, the commodities, currencies, shares, stock or securities, interest rates, indices or other matters—

(a) to which the future or option is referable, or

(b) to the value of which it is referable.