Corporation Tax Act 2009 (c. 4)

Part 7 U.K. Derivative contracts

Chapter 3 U.K. Credits and debits to be brought into account: general

Application of fair value accounting U.K.

602 Contract becoming one relating to holding in OEIC, unit trust or offshore fund U.K.

(1) This section applies if—

(a) a company is a party to a relevant contract in two successive accounting periods,

(b) section 587 (contract relating to holding in OEIC, unit trust or offshore fund) applies in relation to the relevant contract for the second accounting period but not the first accounting period, and

(c) immediately before the beginning of the second accounting period the relevant contract was a chargeable asset.

(2) For the purposes of section 601(2), the opening valuation of the contract as at the beginning of the second accounting period is taken to be equal to the market value of the contract.

(3) In subsection (2) “the market value of the contract” means the amount which would have been the market value of the contract for the purposes of corporation tax on chargeable gains if it had been disposed of immediately before the end of the first accounting period.

(4) For the rules which apply where the company ceases to be a party to the contract, see section 660 (company ceasing to be party to contract relating to holding in OEIC, unit trust or offshore fund).