Finance Act 2008

Derivative contracts

20 (1) Schedule 26 to FA 2002 (derivative contracts) is amended as follows.

(2) In paragraph 3(1)(b)(ii) (contract must be treated for accounting purposes as financial asset or liability), for “is treated for accounting purposes as, or as forming” substitute “for accounting purposes is, or forms”.

(3) In paragraph 4(2)(b) (contracts excluded by virtue of underlying subject matter) after “(2D)” insert “and which are not designed to produce a return which equates, in substance, to the return on an investment of money at a commercial rate of interest”.

(4) The amendments made by this paragraph have effect in relation to accounting periods ending on or after 12 March 2008.

(5) But where a company was, immediately before that date, a party to a relevant contract that becomes a derivative contract for the purposes of Schedule 26 to FA 2002 by virtue of those amendments, it is to be regarded for those purposes as having been entered into by the company on that date for a consideration equal to the notional carrying value (within the meaning of paragraph 43A(5) of that Schedule) on that date.