Part 7Derivative contracts

Chapter 7Chargeable gains arising in relation to derivative contracts

Issuers of securities with embedded derivatives: deemed options

655Ceasing to be party to debtor relationship when deemed option not exercised

1

Subsection (2) applies if the company ceases to be a party to the debtor relationship mentioned in section 652(2) at a time when the option mentioned in section 652(3) has not been exercised.

2

The company is treated for the purposes of corporation tax on chargeable gains—

a

as having acquired an asset for consideration of an amount equal to Y, and

b

as having disposed of that asset for consideration of an amount equal to CV.

3

In this section—

  • “CV” has the same meaning as in section 654,

  • “Y” means—

    1. a

      if the company ceases to be a party to the debtor relationship as a result of the redemption or repayment of the liability representing that relationship, the amount paid by the company, or

    2. b

      otherwise, the consideration given by the company on its ceasing to be a party to that relationship,

    in either case reduced (but not below nil) by the fair value of the host contract at the date on which it so ceases, and

  • “the host contract” has the same meaning as in section 654.