Part 7

Derivative contracts
Chapter 7

Chargeable gains arising in relation to derivative contracts

Some derivative contracts to be taxed on a chargeable gains basis

Derivative contracts to be taxed on a chargeable gains basis
641
1
This section applies to a derivative contract of a company for an accounting period if any of the provisions in subsection (2) applies to the derivative contract for the period.
2
The provisions are—
a
section 643 (contracts relating to land or certain tangible movable property),
b
section 645 (creditor relationships: embedded derivatives which are options),
c
section 648 (creditor relationships: embedded derivatives which are exactly tracking contracts for differences), and
d
section 650 (property based total return swaps).
3
For the purposes of corporation tax on chargeable gains—
a
if C exceeds D, a chargeable gain equal to the amount of the excess is treated as accruing to the company in the accounting period,
b
if D exceeds C, an allowable loss equal to the amount of the excess is treated as accruing to the company in the accounting period.
4
“C” means the sum of the relevant credits for the accounting period in respect of the derivative contract.
5
“D” means the sum of the relevant debits for the accounting period in respect of the derivative contract.
6
For a case in which this section does not apply, see section 642.
7
See also section 663 (carry back of net losses on derivative contracts to which this section applies).
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)