Section 400A — Corporation Tax Act 2009: Adjustments for changes in index: relevant hedging schemes

Adjustments for changes in index: relevant hedging schemes 400A 1 This section applies where—

a section 400 applies in relation to an amount to be brought into account for an accounting period of a company (“company A”) in respect of a security, and b conditions 1 to 3 are met.

2 Condition 1 is that company A is a party to a relevant hedging scheme at any time in the accounting period.

3 Condition 2 is that there is an increase in the relevant prices index between the times mentioned in subsection (1) of section 400.

4 Condition 3 is that the index-linked capital return on the security in the accounting period, or a proportion of it, is hedged.

5 Where this section applies, any increase in the carrying value of the security at the earlier of the times mentioned in subsection (1) of section 400 that would, apart from this section, be made under subsection (2) of that section is reduced—

a in a case in which the index-linked capital return on the security in the accounting period is wholly hedged, to nil, and b in a case in which only a proportion of that return is hedged, by the same proportion.

6 For the purposes of this section “ a relevant hedging scheme ” means a scheme the purpose, or one of the main purposes, of any party to which, on entering into the scheme, is to secure that the index-linked capital return on the security, or a proportion of it, is hedged.

7 For the purposes of this section the “index-linked capital return” of the security is so much of the return on the security as—

a would, disregarding section 400, result in an increase in the carrying value of the security between the times mentioned in subsection (1) of that section, and b is attributable to an increase in the relevant prices index.

8 For the purposes of this section the index-linked capital return on the security, or any proportion of that return, is “hedged” if (whether because of the operation of a swap or otherwise) the pre-tax economic profit or loss made by the relevant group or company in the accounting period is unaffected by it.

9 In subsection (8) “ the relevant group or company ” means—

a company A and every other company that is at any time in the accounting period—

i associated with company A, and ii a party to the relevant hedging scheme, or b if there is no such other company, company A.

10 In this section “ scheme ” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.