Corporation Tax Act 2009

665 Introduction to section 666

(1) Section 666 (allowable loss treated as accruing) applies to a company for an accounting period if each of conditions A to F is met.

(2) Condition A is that the company is treated as a party to a relevant contract under section 585(2) (loan relationships with embedded derivatives) because of a debtor relationship of the company.

(3) Condition B is that the division mentioned in section 585(1) (loan relationships with embedded derivatives) in the case of the debtor relationship is between—

(a) rights and liabilities under a loan relationship, and

(b) rights and liabilities under an equity instrument of the company.

(4) Condition C is that the relevant contract is treated as an option by section 585(3) (contract treated as option, future or contract for differences).

(5) Condition D is that the company pays an amount in the accounting period to the person who is a party to the debtor relationship as creditor in discharge of any obligations under that relationship.

(6) Condition E 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 that relationship in the ordinary course of that business.

(7) Condition F is that the company is not an excluded body.

(8) In this section “option” is to be construed as if section 580(2) and (3) (meaning of “option”) were omitted.