Modifications etc. (not altering text)
C1Sch. 26 modified by 1996 c. 8, s. 86(3C) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by 2002 c. 23, s. 82, Sch. 25 Pt. 1 para. 6(3))
C2Sch. 26 extended (retrospective to 30.9.2002) by Finance Act 2003 (c. 14), s. 177(4)(8)(11)
C3Sch. 26 applied by 1988 c. 1, s. 440(2B) (as amended (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 70)
C4Sch. 26 modified by 1996 c. 8, s. 94A (as inserted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 13)
C5Sch. 26 applied (with modifications) (5.10.2004) by Energy Act 2004 (c. 20), s. 198(2), Sch. 9 para. 24 (with s. 38(2)); S.I. 2004/2575, art. 2(1), Sch. 1
C6Sch. 26 applied (with modifications) (5.10.2004) by Energy Act 2004 (c. 20), s. 198(2), Sch. 9 para. 12 (with s. 38(2)); S.I. 2004/2575, art. 2(1), Sch. 1
C7Sch. 26 modified (8.6.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 7; S.I. 2005/1444, art. 2(1), Sch. 1
C8Sch. 26 modified (8.6.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 19; S.I. 2005/1444, art. 2(1), Sch. 1
[F145L.(1)[F2This paragraph applies where]—
(a)a company is treated under paragraph 2(4) as party to [F3an embedded derivative contract], F4...
[F5(aa)the contract is a derivative contract falling within paragraph 3(1)(a),
(ab)paragraph 45M does not apply in relation to the contract,]
(b)regulation 9 of the Disregard Regulations (interest rate contracts) does not apply to the contract[F6, and
(c)no election having effect in relation to the derivative contract is or has been made under sub-paragraph (2A),]
F7...
[F8(1A)In this paragraph “the original contract” means the contract mentioned in paragraph 2(3) to which the company is party and as a result of which the company falls to be treated by virtue of paragraph 2(4) as a party to the derivative contract.
(1B)Where this paragraph applies—
(a)paragraph 14(2) and (3) (trading and non-trading credits and debits) do not apply in relation to the derivative contract, but
(b)sub-paragraph (1C) or (2) applies in relation to the original contract, according to whether or not that contract is a derivative contract.
(1C)If the original contract is a derivative contract, profits and losses are to be computed for the purposes of this Schedule as if that contract—
(a)were not one where the rights and liabilities are treated as divided as mentioned in paragraph 2(3), and
(b)were not one in relation to which a fair value basis of accounting is used.
(2)If the original contract is not a derivative contract, profits and losses are to be brought into account for the purposes of the Corporation Tax Acts in relation to that contract as if that contract—
(a)were not one where the rights and liabilities are treated as divided as mentioned in paragraph 2(3), and
(b)were not one in relation to which a fair value basis of accounting is used.
This sub-paragraph has effect notwithstanding paragraph 1(2).]
(2A)A company may elect that this paragraph is not to apply to any of its contracts [F9unless—
(a)the contract is a contract of long-term insurance, or
(b)the underlying subject matter of the embedded derivative contract is, or includes, commodities.
Paragraph 45LA contains further provisions about elections under this sub-paragraph.]
(2B)Any such election—
(a)must be made by giving notice in writing to Her Majesty’s Revenue and Customs,
(b)must be made before the end of the first applicable accounting period of the company, and
(c)is irrevocable.
(2C)For the purposes of sub-paragraph (2B), the “first applicable accounting period” is the first accounting period ending on or after 17th August 2005 in which the conditions in paragraphs (a) to (b) of sub-paragraph (1) are satisfied.
(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
F2Words in Sch. 26 para. 45L(1) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Finance Act 2002, Schedule 26 (Parts 2 and 9) (Amendment No. 3) Order 2005 (S.I. 2005/3440), arts. 1, 12(2)(a)
F3Words in Sch. 26 para. 45L(1)(a) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Finance Act 2002, Schedule 26 (Parts 2 and 9) (Amendment No. 3) Order 2005 (S.I. 2005/3440), arts. 1, 12(2)(b)
F4Word in Sch. 26 para. 45L(1)(a) omitted (with effect in accordance with art. 1(4) of the amending S.I.) by virtue of The Finance Act 2002, Schedule 26, Parts 2 and 9 (Amendment No. 2) Order 2005 (S.I. 2005/2082), arts. 1(2), 21(2)(b)
F5Sch. 26 para. 45L(1)(aa)(ab) inserted (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), 21(2)(c)
F6Sch. 26 para. 45L(1)(c) and word inserted (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), 21(2)(d)
F7Words in Sch. 26 para. 45L(1) omitted (with effect in accordance with art. 1 of the amending S.I.) by virtue of The Finance Act 2002, Schedule 26 (Parts 2 and 9) (Amendment No. 3) Order 2005 (S.I. 2005/3440), arts. 1, 12(2)(c)
F8Sch. 26 paras. 45L(1A)-(1C)(2) substituted for Sch. 26 para. 45L(2) (with effect in accordance with art. 1 of the amending S.I.) by The Finance Act 2002, Schedule 26 (Parts 2 and 9) (Amendment No. 3) Order 2005 (S.I. 2005/3440), arts. 1, 12(3)
F9Words in Sch. 26 para. 45L(2A) added (with effect in accordance with art. 1 of the amending S.I.) by The Finance Act 2002, Schedule 26 (Parts 2 and 9) (Amendment No. 3) Order 2005 (S.I. 2005/3440), arts. 1, 12(4)