Income Tax (Trading and Other Income) Act 2005

564 Deemed disposal where futures run to delivery or options are exercised U.K.

(1) This section applies if there are two or more related transactions (see section 566) in relation to which conditions A and B are met.

(2) Condition A is that one of the transactions is the creation or acquisition (by the making or receiving of a grant or otherwise) of a future or option.

(3) Condition B is that the other transaction or one of the other transactions—

(a) is the running of the future to delivery or the exercise of the option, and

(b) is not treated for the purposes of this Chapter as a disposal of a future or option.

(4) In relation to the parties to the future or option, this Chapter applies as if—

(a) a disposal of the future or option takes place at the time (“the relevant time”) immediately before the future runs to delivery or, as the case may be, the option is exercised, and

(b) the scheme or arrangements by reference to which the transactions are related transactions provide for the disposal.

(5) In the case of a person whose rights and entitlements under the future or option have a market value at the relevant time, the disposal referred to in subsection (4)(a) is taken to be for a consideration equal to that market value.

(6) In the case of any other party to the future or option (“P”), the disposal is taken—

(a) to be made for a nil consideration, and

(b) to involve P in incurring costs equal to the release amount.

(7) In subsection (6) “the release amount” means the amount which P might reasonably have been expected to pay, in a transaction at arm's length entered into at the relevant time, for the release of P's obligations and liabilities under the future or option.

(8) Section 144(2) and (3) of TCGA 1992 are ignored for the purposes of subsections (1) to (3).