Corporation Tax Act 2009 section 648

Disapplication of section 648

Section 648, which deals with creditor relationships containing embedded derivatives that exactly track contracts for differences, is switched off in certain transitional circumstances linked to the Finance Act 2004 changeover rules.

• Section 648 normally applies where a creditor relationship contains an embedded derivative that exactly tracks a contract for differences.
• This rule is disapplied where the underlying creditor relationship asset is subject to the transitional provisions in paragraph 11(2) of Schedule 10 to the Finance Act 2004.
• The disapplication operates on a company-by-company and accounting-period-by-accounting-period basis.
• The effect is to preserve the older tax treatment for these particular derivative contracts during the transitional period, rather than applying the new embedded derivative rules.