The Finance Act 2002, Schedule 26, (Parts 2 and 9) (Amendment) Order 2006

Amendment of paragraph 45M of Schedule 26

27.—(1) Amend paragraph 45M(1) (treatment of host contract as a loan relationship) as follows.

(2) For sub-paragraphs (1) and (2) substitute—

“(1) This paragraph applies where for an accounting period—

(a) a company is party to a hybrid derivative contract falling within paragraph 3(1)(b),

(b) the nested derivative is a derivative contract falling within paragraph 3(1)(a),

(c) the underlying subject matter of the derivative contract consists, or is treated as consisting, wholly of—

(i) shares in a company, or

(ii) rights of a unit holder under a unit trust scheme, and

(d) the quasi-derivative host contract is treated for accounting purposes as, or as forming part of, a financial asset.

(2) Where this paragraph applies—

(a) the quasi-derivative host contract shall be treated for the purposes of the Corporation Tax Acts as if it were a creditor relationship of the company, and

(b) the nested derivative shall be treated—

(i) as satisfying the conditions in paragraph 4(2A), and

(ii) as a chargeable asset (within the meaning of paragraph 4A(4)).”.

(3) Omit sub-paragraphs (5) and (6).

(1)

Paragraph 45M was inserted by article 18 of S.I. 2005/646 and amended by article 22 of S.I. 2005/2082 and article 14 of S.I. 2005/3440.