Derivative contracts relating to land or certain tangible movable propertyU.K.
[F145C.(1)This paragraph applies to a derivative contract of a company for an accounting period if the following conditions are satisfied—
(a)the derivative contract is not one to which the company is party at any time in the accounting period for the purposes of a trade carried on by the company (but see sub-paragraph (2)),
(b)the company is not a body falling within sub-paragraph (3);
(c)the underlying subject matter of the derivative contract falls within sub-paragraph (4);
(d)paragraph 45F (embedded derivative which is an exactly tracking contract for differences whose subject matter is land) does not apply to the derivative contract.
(2)The condition in sub-paragraph (1)(a) does not apply if the company—
(a)is party to the derivative contract for the purposes of life assurance business, or
(b)is a mutual trading company.
(3)The bodies that fall within this sub-paragraph are—
an authorised unit trust;
an investment trust;
an open-ended investment company;
a venture capital trust.
(4)The underlying subject matter of a derivative contract falls within this sub-paragraph if it consists of either or both of the following—
(a)land (wherever situated);
(b)tangible movable property, other than commodities which are tangible assets.
This sub-paragraph is subject to the following qualification.
(5)Where the underlying subject matter of a derivative contract includes income from property of either or both of the types described in sub-paragraph (4) and that income is—
(a)subordinate in relation to so much of the underlying subject matter of the derivative contract as consists of property of either or both of those types, or
(b)of small value in comparison with the value of the underlying subject matter as a whole,
that income shall be left out of account in determining for the purposes of sub-paragraph (1)(c) whether the underlying subject matter of the derivative contract falls within sub-paragraph (4).
(6)For the purposes of sub-paragraph (5) whether part of the underlying subject matter of a derivative contract of a company is subordinate or of small value is to be determined by reference to the time when the company enters into or acquires the contract.]
Textual Amendments
F1Sch. 26 paras. 45A-45I inserted (with effect in accordance with art. 1(2)(3)(4) 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), 15