Section 658 — Corporation Tax Act 2009: Chargeable gain or allowable loss treated as accruing

Chargeable gain or allowable loss treated as accruing 658 1 Subsection (2) applies if—

a the debtor relationship mentioned in section 656(2) comes to an end, and b an amount (“the discharge amount”) is paid to discharge all the company's obligations under that relationship.

2 For the purposes of corporation tax on chargeable gains, a chargeable gain or allowable loss equal to the amount mentioned in subsection (3) is treated as accruing to the company.

3 That amount is the amount of the gain or loss (as the case may be) which would accrue on the assumptions in subsection (4).

4 Those assumptions are that—

a the derivative contract is an asset of the company, b there is a disposal of that asset at the time when the debtor relationship comes to an end, c the consideration for the disposal of that asset is equal to the relevant amount, and d the cost of the asset is equal to the discharge amount.

5 In subsection (4) “ the relevant amount ” means—

a if the company was a party to the debtor relationship at the time it was created, the amount of the proceeds of issue of the security representing that relationship, or b if the company became a party to the debtor relationship after that time, the amount of the tax-adjusted carrying value of the host contract at that time.

6 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 debtor relationship.