Part 7

Derivative contracts
Chapter 7

Chargeable gains arising in relation to derivative contracts

Derivative contracts to which sections 640 and 641 apply

Creditor relationships: embedded derivatives which are exactly tracking contracts for differences
648
1
This section applies to a derivative contract of a company for an accounting period if each of conditions A to F is met.
2
Condition A is that the derivative contract is a relevant contract to which the company is treated as a party under section 585(2) (loan relationships with embedded derivatives) because of a creditor relationship of the company.
3
Condition B is that the derivative contract is treated as a contract for differences by section 585(3) (contract treated as option, future or contract for differences).
4
Condition C is that the derivative contract is an exactly tracking contract.
5
Condition D is that the underlying subject matter of the derivative contract is qualifying ordinary shares listed on a recognised stock exchange.
6
Condition E is that the company is not a party to the creditor relationship at any time in the accounting period for the purposes of a trade carried on by it.
7
Condition F is that the company is not an excluded body.
8
Where this section applies to a derivative contract, the asset representing the creditor relationship is treated for corporation tax purposes as not being a qualifying corporate bond.
9
See also section 672 (treatment of net gains and losses on disposal of 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)