Paragraph 45D: treatment of net gains and losses on terminal exercise of optionU.K.
[F145H.(1)This paragraph applies to a derivative contract of a company if the following conditions are satisfied—
(a)the derivative contract is one to which paragraph 45D applies for an accounting period,
(b)rights that fall to be treated as comprised in the derivative contract are exercised to any extent in that accounting period,
(c)those rights are rights to acquire shares which are the underlying subject matter of the derivative contract.
(2)In any such case, for the purpose of computing any chargeable gain accruing to the company on a disposal by it of all the shares so acquired, the sums allowable as a deduction under section 38(1)(a) of the Taxation of Chargeable Gains Act 1992 (acquisition costs) shall—
(a)if G exceeds L, be increased by the amount of that excess,
(b)if L exceeds G, be reduced by the amount of that excess,
and, in the case of a part disposal of those shares, section 42(2) of that Act shall have effect accordingly.
(3)If the amount of the excess in sub-paragraph (2)(b) is greater than the amount of expenditure allowable under section 38(1)(a) of the Taxation of Chargeable Gains Act 1992, the amount of the excess that cannot be deducted from the expenditure so allowable shall, for the purpose mentioned in sub-paragraph (2), be added to the amount of the consideration received for the disposal of the shares.
(4)In this paragraph—
G is the sum of the amounts of any chargeable gains treated as accruing to the company under paragraph 45A(4)(a) in respect of the derivative contract in that or any previous accounting period so far as referable, on a just and reasonable apportionment to the shares acquired as a result of the exercise of the rights mentioned in sub-paragraph (1)(b);
L is the sum of the amounts of any allowable losses treated as accruing to the company under paragraph 45A(4)(b) in respect of the derivative contract in that or any previous accounting period so far as referable, on a just and reasonable apportionment to the shares acquired as a result of the exercise of the rights mentioned in sub-paragraph (1)(b).]
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