1694.This section and the next two set out how a company partner brings into account credits and debits in respect of its share of a firm’s derivative contracts. This section provides that each company partner, not the firm, brings credits and debits into account in calculating its profits chargeable to tax. It is based on paragraph 49(1) and (2) of Schedule 26 to FA 2002.
1695.Paragraph (c) in subsection (1) requires that the firm is a party to a contract that “is a derivative contract or would be a derivative contract if the firm were a company”. A firm is not a company. So a contract held by a firm would not meet any test under which a contract is or is treated as a derivative contract because it is held by a company.
1696.Subsection (2) switches off the normal rule in section 1259 (which rewrites section 114(1) of ICTA) under which the profits of the firm’s trade etc are calculated, in accordance with the partners’ interests in the firm, as if the firm were a company.