3

Sub-paragraph (4) applies where a company, in accordance with generally accepted accounting practice, treats rights and liabilities under a contract to which it is party and which is not a loan relationship, as divided between—

a

rights and liabilities under one or more derivative financial instruments (“embedded derivatives”), and

b

the remaining rights and liabilities (the “host contract”).

4

The company shall be treated for the purposes of Schedule 26 as—

a

party to a relevant contract whose rights and liabilities consist only of those of the embedded derivative, or

b

if there is more than one embedded derivative, party to relevant contracts each of whose rights and liabilities consist only of those of one of the embedded derivatives.

5

Each relevant contract to which the company is treated as party under sub-paragraph (4) shall be treated as an option, a future or a contract for differences according to whether the rights and liabilities of the embedded derivative would be of that character if contained in a separate contract.