Part 7

Derivative contracts
Chapter 2

Contracts to which this Part applies

Cases where companies treated as parties to relevant contracts

Other contracts with embedded derivatives
586
1
This section applies if a company—
a
is a party to a contract which is neither a hybrid derivative nor a loan relationship, and
b
in accordance with generally accepted accounting practice, treats the rights and liabilities under the contract as divided between—
i
rights and liabilities under one or more derivatives (“embedded derivatives”), and
ii
the remaining rights and liabilities.
2
The company is treated for the purposes of this Part—
a
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, as a party to relevant contracts each of whose rights and liabilities consist only of those of one of the embedded derivatives.
3
Each relevant contract to which a company is treated as a party under subsection (2) is treated for the purposes of this Part as an option, a future or a contract for differences depending on what the character of a separate contract containing the rights and liabilities of the embedded derivative would be.
4
See also section 616 (disapplication of fair value accounting for certain embedded derivatives).
Pt. 7 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
Pt. 7 modified by 2007 c. 3, s. 809FZZ(8) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
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)