C1C2Part 7Derivative contracts
Chapter 7Chargeable gains arising in relation to derivative contracts
Issuers of securities with embedded derivatives: deemed options
652Introduction to sections 653 to 655
1
Sections 653 to 655 apply to a derivative contract of a company for an accounting period if each of conditions A to E is met.
2
Condition A is that the derivative contract is a relevant contract to which the company is treated as a party under section 585(2) (loan relationships with embedded derivatives) because of a debtor relationship of the company.
3
Condition B is that the derivative contract is treated as an option by section 585(3) (contract treated as option, future or contract for differences).
4
Condition C is that the underlying subject matter of the derivative contract is shares.
5
Condition D is that at the time when the company became a party to the debtor relationship—
a
it was not carrying on a banking business or a business as a securities house, or
b
if it was carrying on such a business, it did not become a party to the debtor relationship in the ordinary course of that business.
6
Condition E is that the company is not an excluded body.
7
In this section “option” is to be construed as if section 580(2) and (3) (meaning of “option”) were omitted.
Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)