What does section 89 of Schedule 2 to the Corporation Tax Act 2009 do?

Section 89 provides a transitional rule that disapplies section 661 of the Corporation Tax Act 2009 where a contract became a derivative contract before 30 December 2006. This means the special tax transition rules in section 661 are switched off entirely for contracts that crossed the derivative contract threshold before that date.

What is the cut-off date for the disapplication of section 661 under this transitional rule?

The cut-off date is 30 December 2006. Contracts that became derivative contracts before this date are outside the scope of section 661. Only contracts that crossed the threshold into being derivative contracts on or after 30 December 2006 are subject to the section 661 corporation tax rules.

What does section 661 of the Corporation Tax Act 2009 normally deal with?

Section 661 deals with situations where a contract that did not originally qualify as a derivative contract later changes in nature and becomes one. It sets out specific corporation tax rules governing how that transition is handled, including the tax consequences arising from the change in the contract's status.

How does section 89 affect a contract that became a derivative contract before 30 December 2006?

If a contract became a derivative contract before 30 December 2006, section 661 does not apply. The company should disregard section 661 entirely and instead follow whatever corporation tax rules applied at the time of the contract's change in status, rather than the specific transition provisions of section 661.

Corporation Tax Act 2009 section 89

Disapplication of section 661

Section 89 provides a transitional rule that switches off the provisions of section 661 where a contract became a derivative contract before a specified date.

Section 661 normally applies when a contract that was not originally a derivative contract subsequently becomes one
This transitional rule disapplies section 661 for contracts that became derivative contracts before 30 December 2006
Contracts crossing the derivative contract boundary before that date are therefore outside the scope of section 661
Only contracts becoming derivative contracts on or after 30 December 2006 are subject to the section 661 rules

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