Part 7Derivative contracts

Chapter 8Further provision about chargeable gains and derivative contracts

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

673Meaning of G, L and CV in section 672

(1)

This section applies for the purposes of section 672.

(2)

G is the sum of the amounts of any chargeable gains treated as accruing to the company under section 641(3)(a) (derivative contracts to be taxed on a chargeable gains basis) in respect of the derivative contract in each relevant accounting period.

(3)

L is the sum of the amounts of any allowable losses treated as accruing to the company under section 641(3)(b) in respect of the derivative contract in each relevant accounting period.

(4)

CV is the amount by which the F1tax-adjusted carrying value of the host contract at the date of the disposal exceeds the F1tax-adjusted carrying value of that contract at the date on which the company became a party to the creditor relationship mentioned in section 648(2).

(5)

In this section—

“the host contract” means the loan relationship to which the company is treated as a party under section 415(2) (loan relationships with embedded derivatives) because of the creditor relationship mentioned in section 648(2), and

“relevant accounting period” means—

(a)

the accounting period in which the disposal is made, or

(b)

any previous accounting period.