Derivative contracts and relevant contractsU.K.
2[F1(1)For the purposes of the Corporation Tax Acts, a company’s derivative contracts are those of its relevant contracts—
(a)which satisfy any of the conditions in paragraphs (a) to (c) of paragraph 3(1), and
(b)which are not prevented from being derivative contracts by paragraph 4 or any other provision of the Corporation Tax Acts.]
(2)For the purposes of this Schedule a “relevant contract” is—
(a)an option,
(b)a future, or
(c)a contract for differences.
[F2(3)Sub-paragraph (4) applies where a company, in accordance with generally accepted accounting practice, treats rights and liabilities under a contract to which it is party and which is not a loan relationship, as divided between—
(a)rights and liabilities under one or more derivative financial instruments (“embedded derivatives”), and
(b)the remaining rights and liabilities (the “host contract”).
(4)The company shall be treated for the purposes of [F3this Schedule] as—
(a)party to a relevant contract whose rights and liabilities consist only of those of the embedded derivative, or
(b)if there is more than one embedded derivative, party to relevant contracts each of whose rights and liabilities consist only of those of one of the embedded derivatives.
(5)Each relevant contract to which the company is treated as party under sub-paragraph (4) shall be treated as an option, a future or a contract for differences according to whether the rights and liabilities of the embedded derivative would be of that character if contained in a separate contract.]
Textual Amendments
F1Sch. 26 para. 2(1) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2002, Schedule 26, Parts 2 and 9 (Amendment) Order 2004 (S.I. 2004/2201), arts. 1(1), 3
F2Sch. 26 para. 2(3)-(5) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2002, Schedule 26, Parts 2 and 9 (Amendment No. 2) Order 2004 (S.I. 2004/3270), arts. 1(1), 3
F3Words in Sch. 26 para. 2(4) substituted (with effect in accordance with art. 1(4) of the amending S.I.) by The Finance Act 2002, Schedule 26, Parts 2 and 9 (Amendment No. 2) Order 2005 (S.I. 2005/2082), arts. 1(2), 3