Part 7Derivative contracts
Chapter 8Further provision about chargeable gains and derivative contracts
Treatment of shares acquired in certain circumstances
667Shares acquired on exercise of non-embedded option
(1)
This section applies if—
(a)
a company is a party to a derivative contract in an accounting period,
(b)
the derivative contract is a plain vanilla contract,
(c)
the contract is an option,
(d)
rights to acquire shares are comprised in the contract, and
(e)
shares are acquired as a result of the exercise of any of those rights in the accounting period.
(2)
For the purpose of calculating 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 TCGA 1992 (acquisition costs) are—
(a)
if G exceeds L, increased by the amount of that excess,
(b)
if L exceeds G, reduced by the amount of that excess,
and, in the case of a part disposal of those shares, section 42(2) of that Act (part disposals) has effect accordingly.
(3)
If the amount of the excess in subsection (2)(b) is greater than the amount of expenditure allowable under section 38(1)(a) of TCGA 1992, the amount of the excess which cannot be deducted from the expenditure so allowable is, for the purpose mentioned in subsection (2), added to the amount of the consideration for the disposal of the shares.
(4)
For the meaning of G and L, see section 669.
668Shares acquired on running of future to delivery
(1)
This section applies if—
(a)
a company is a party to a derivative contract in an accounting period,
(b)
the derivative contract is a plain vanilla contract,
(c)
the contract is a future, and
(d)
delivery is taken of shares in accordance with the terms of the future.
(2)
For the purpose of calculating any chargeable gain accruing to the company on a disposal by it of all the shares so delivered, the sums allowable as a deduction under section 38(1)(a) of TCGA 1992 (acquisition costs) are—
(a)
if G exceeds L, increased by the amount of that excess,
(b)
if L exceeds G, reduced by the amount of that excess,
and, in the case of a part disposal of those shares, section 42(2) of that Act (part disposals) has effect accordingly.
(3)
If the amount of the excess in subsection (2)(b) is greater than the amount of expenditure allowable under section 38(1)(a) of TCGA 1992, the amount of the excess which cannot be deducted from the expenditure so allowable is, for the purpose mentioned in subsection (2), added to the amount of the consideration for the disposal of the shares.
(4)
For the meaning of G and L, see section 669.
669Meaning of G and L in sections 667 and 668
(1)
This section applies for the purposes of sections 667 and 668.
(2)
G is the sum of the credits brought into account under section 574 (non-trading credits and debits to be brought into account under Part 5) in respect of the derivative contract in each relevant accounting period so far as referable, on a just and reasonable apportionment, to the shares acquired as a result of the exercise of rights mentioned in section 667(1)(e) or the delivery mentioned in section 668(1)(d).
(3)
L is the sum of the debits brought into account under section 574 in respect of the derivative contract in each relevant accounting period, so far as so referable.
(4)
In this section “relevant accounting period” means—
(a)
the accounting period in which the disposal in question is made, or
(b)
any previous accounting period.