Part 7

Derivative contracts
Chapter 8

Further provision about chargeable gains and derivative contracts

Treatment of net gains and losses on disposal of certain embedded derivatives

Treatment of net gains and losses on disposal of certain embedded derivatives
672
1
This section applies if—
a
a derivative contract is one to which section 648 (creditor relationships: embedded derivatives which are exactly tracking contracts for differences) applies for an accounting period, and
b
the asset representing the creditor relationship mentioned in section 648(2) is disposed of in the accounting period.
2
For the purpose of calculating any chargeable gain accruing to the company on the disposal, the sums allowable as a deduction under section 38(1)(a) of TCGA 1992 (acquisition costs) are—
a
if the sum of G and CV exceeds L, increased by the amount of that excess,
b
if L exceeds the sum of G and CV, reduced by the amount of that excess.
3
If the amount of the excess in subsection (2)(b) is greater than the amount of expenditure allowable under section 38(1)(a) of TCGA 1992, the amount of the excess which cannot be deducted from the expenditure so allowable is, for the purpose mentioned in subsection (2), added to the amount of the consideration for the disposal.
4
Sections 37 and 39 of TCGA 1992 (consideration chargeable to tax on income and exclusion of expenditure by reference to tax on income) do not apply in relation to the disposal.
5
For the meaning of G, L and CV, see section 673.
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)