Finance Act 1985

72 Commodity and financial futures and traded options. U.K.

(1) If, apart from [sectin 128 of the Taxes Act F1 , gains arising to any person in the course of dealing in commodity or financial futures or in [qualifying options F2 ] would constitute, for the purposes of the Tax Acts, profits or gains, chargeable to tax under Schedule D otherwise than as the profits of a trade, then, on and after 6th April 1985,—

(a) his outstanding obligations under any futures contract entered into in the course of that dealing and any [qualifying option F2 ] granted or acquired in the course of that dealing shall be regarded as assets to the disposal of which the M1 Capital Gains Tax Act 1979 (in this section referred to as “the principal Act”) applies; . . . F3

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F4

(2) In subsection (1) above—

(a) “commodity of financial futures” means commodity futures or financial futures which are for the time being dealt in on a recognised futures exchange, within the meaning of the principal Act; and

[(b) “qualifying option” means a traded option or financial option as defined in section 137(9) of that Act F5 .]

[(2A) Notwithstanding the provisions of subsections (2)(a) above, where, otherwise than in course of dealing with a recognised futures exchange, within the meaning of the principal Act,—

(a) an authorised person or listed institution enters into a commodity or financial futures contract with another person, or

(b) the outstanding obligations under a commodity or financial futures contract to which an authorised person or listed institution is a party are brought to an end by a further contract between the parties to the futures contract, then, except in so far as any gain or loss arising to any person from that transaction arises in the course of the trade, the gain or loss shall be regarded for the purposes of subsection (1) above as arising to him in the course of dealing in vcommodity or financial futures

(2B) In subsection (2A) above— “authorised person”has the same meaning as in the Financial Services Act 1986, and “listed institution”has the same meaning as in section 43 of that Act F6 .]

(3) For the purposes of the principal Act, where, in the course of dealing in commodity or financial futures, a person who has entered into a futures contract closes out that contract by entering into another futures contract with obligations which are reciprocal to those of the first-mentioned contract, that transaction shall constitute the disposal of an asset (namely, his outstanding obligations under the first-mentioned contract) and, accordingly,—

(a) any money or money’s worth received by him on that transaction shall constitute consideration for the disposal; and

(b) any money or money’s worth paid or given by him on that transaction shall be treated as incidental costs to him of making the disposal.

(4) In any case where,—

(a) a person who, in the course of dealing in financial futures, has entered into a futures contract does not close out that contract (as mentioned in subsection (3) above), and

(b) the nature of the futures contract is such that, at its expiry date, the persons concerned is entitled to receive or liable to make a payment in full settlement of all obligations under that contract,

then, for the purposes of the principal Act, he shall be treated as having disposed of an asset (namely, his outstanding obligations under the futures contract) and the payment received or made by him shall be treated as consideration for that disposal or, as the case may be, as incidental costs to him of making the disposal.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F7

X1 (6) In section 155 of the principal Act (interpretation) after subsection (3) there shall be inserted the following subsections—

“(3A) In this Act “recognised futures exchange” means the London International Financial Futures Exchange and any other futures exchange which is for the time being designated for the purposes of this Act by order made by the Board.

(3B) An order made by the Board under subsection (3A) above—

(a) may designate a futures exchange by name or by reference to any class or description of futures exchanges, including, in the case of futures exchanges in a country outside the United Kingdom, a class or description framed by reference to any authority or approval given in that country; and

(b) may contain such transitional and other supplemental provisions as appear to the Board to be necessary or expedient.”

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F4

Editorial Information

X1 Part of the text of ss. 67(2), 72(6), 90(3)-(5), 91(1) and (3), 92(2)(4), 96(1), Sch. 19 paras. 1(2)(3), 2(2), 3(3), 5(5)( a ), 20(2), Sch. 27 is in the form in which it was originally enacted: it was not reproduced in Statutes in Force and does not reflect any amendments or repeals that may have been made prior to 1.2.1991

Textual Amendments

F1 Income and Corporation Taxes Act 1988 Sch. 29 para. 32

F2 Finance (No. 2) Act 1987 s. 81(1), (8) on and after 29 April 1988 by virtue of S.I. 1988 No. 744 (not reproduced.)

F3 Word repealed by Income and Corporation Taxes Act 1988 s. 844 and Sch. 31

F4 S. 72(1)(b), (7) repealed by Income and Corporation Taxes Act 1988 s. 844 and Sch. 31

F5 Finance (No. 2) Act 1987 s. 81(2), (8) on and after 29 April 1988 by virtue of S.I. 1988 No. 744 (not reproduced.)

F6 Finance (No. 2) Act 1987 s. 81(3), (8) on and after 29 April 1988 by virtue of S.I. 1988 No. 744

F7 Repealed by Finance (No. 2) Act 1987 s. 81(1), (8) and 104(4) and Sch. 9 Part II on and after 29 April 1988 by virtue of S.I. 1988 No. 744

Modifications etc. (not altering text)

C1 Definitions employed for the purposes of Income and Corporation Taxes Act 1988 ss. 128 and 399

C2 Income and Corporation Taxes Act 1988 ss. 128 and 399(5)

Marginal Citations

M1 1979 c. 14