Part 7

Derivative contracts
Chapter 7

Chargeable gains arising in relation to derivative contracts

Issuers of securities with embedded derivatives: deemed options

Ceasing to be party to debtor relationship when deemed option not exercised
655
1
Subsection (2) applies if the company ceases to be a party to the debtor relationship mentioned in section 652(2) at a time when the option mentioned in section 652(3) has not been exercised.
2
The company is treated for the purposes of corporation tax on chargeable gains—
a
as having acquired an asset for consideration of an amount equal to Y, and
b
as having disposed of that asset for consideration of an amount equal to CV.
3
In this section—
- “CV” has the same meaning as in section 654,
- “Y” means—
  1. if the company ceases to be a party to the debtor relationship as a result of the redemption or repayment of the liability representing that relationship, the amount paid by the company, or
  2. otherwise, the consideration given by the company on its ceasing to be a party to that relationship,
in either case reduced (but not below nil) by the fair value of the host contract at the date on which it so ceases, and
- “the host contract” has the same meaning as in section 654.
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)