Derivatives not embedded in a loan relationshipU.K.
[F145L.(1)Where—
(a)a company is treated under paragraph 2(4) as party to a derivative contract, and
(b)regulation 9 of the Disregard Regulations (interest rate contracts) does not apply to the contract,
paragraph 14(3) (non-trading credits and debits) shall not apply to credits and debits given in relation to the fair value profits and losses arising on the contract.
(2)Where paragraph (1) applies, then notwithstanding paragraph 1(2) of this Schedule, profits and losses are to be brought into account in relation to the host contract for the purposes of the Corporation Tax Acts as if the derivative contract embedded in the host contract were treated for accounting purposes as closely related to the host contract.
(3)In this paragraph “the Disregard Regulations” means the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004.]
Textual Amendments
F1Sch. 26 paras. 45J-45L 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), 10