Corporation Tax Act 2009 section 86-87

Existing assets representing creditor relationships: contracts for differences

Sections 86 and 87 deal with transitional rules for derivative contracts that are embedded in existing creditor relationships (loan-type assets) where those assets are subject to special transitional treatment under Finance Act 2004, and explain how disposals of those assets are handled for chargeable gains purposes, including where a share reorganisation has occurred.

• Where a derivative contract is embedded in a creditor relationship asset that is subject to the Finance Act 2004 transitional rules, the normal treatment for exactly-tracking contracts for differences under Part 7 of CTA 2009 is disapplied, and the derivative contract's credits and debits are not brought into account as non-trading amounts under Part 5
• The underlying creditor relationship asset is treated as not being a qualifying corporate bond for corporation tax purposes, meaning it can give rise to chargeable gains or allowable losses on disposal
• On disposal of the creditor relationship asset, the consideration is reduced on a just and reasonable basis by any interest that has been recognised under the loan relationships rules but is not actually paid or payable to the company as a consequence of the disposal
• If a share reorganisation has taken place and the creditor relationship asset is treated as the original shares, the disposal rules apply to the new holding that results from the reorganisation rather than to the original asset

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