Section 641 — Corporation Tax Act 2009: Derivative contracts to be taxed on a chargeable gains basis

Derivative contracts to be taxed on a chargeable gains basis 641 1 This section applies to a derivative contract of a company for an accounting period if any of the provisions in subsection (2) applies to the derivative contract for the period.

2 The provisions are—

a section 643 (contracts relating to land or certain tangible movable property),

b section 645 (creditor relationships: embedded derivatives which are options),

c section 648 (creditor relationships: embedded derivatives which are exactly tracking contracts for differences),

and d section 650 (property based total return swaps).

3 For the purposes of corporation tax on chargeable gains—

a if C exceeds D, a chargeable gain equal to the amount of the excess is treated as accruing to the company in the accounting period, b if D exceeds C, an allowable loss equal to the amount of the excess is treated as accruing to the company in the accounting period. 4 “ C ” means the sum of the relevant credits for the accounting period in respect of the derivative contract. 5 “ D ” means the sum of the relevant debits for the accounting period in respect of the derivative contract.

6 For a case in which this section does not apply, see section 642.

7 See also section 663 (carry back of net losses on derivative contracts to which this section applies).