Section 585 — Corporation Tax Act 2009: Loan relationships with embedded derivatives

Loan relationships with embedded derivatives 585 1 This section applies if in accordance with generally accepted accounting practice a company treats the rights and liabilities under a loan relationship to which it is a party as divided between—

a rights and liabilities under a loan relationship, and b rights and liabilities under one or more derivative financial instruments or equity instruments (“embedded derivatives”).

2 The company is treated for the purposes of this Part—

a as a party to a relevant contract whose rights and liabilities consist only of those of the embedded derivative, or b if there is more than one embedded derivative, as a party to relevant contracts each of whose rights and liabilities consist only of those of one of the embedded derivatives.

3 Each relevant contract to which a company is treated as a party under subsection (2) is treated for the purposes of this Part as an option, a future or a contract for differences depending on what the character of a separate contract containing the rights and liabilities of the embedded derivative would be.

4 For the corresponding treatment of the rights and liabilities within subsection (1)(a), see section 415 (loan relationships with embedded derivatives).

5 See also—

a section 416 (election for section 415 and this section to apply),

and b section 635 (some creditor relationships treated as ones in relation to which section 415 and this section have effect).