C1Part 7Derivative contracts
Chapter 8Further provision about chargeable gains and derivative contracts
Issuers of securities with embedded derivatives: equity instruments
665Introduction 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.
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)