Corporation Tax Act 2009 section 94

Issuers of securities with embedded derivatives: deemed options

Section 94 provides transitional rules for companies that issued securities containing embedded derivatives (deemed options) where the debtor relationship was already in place before 1 January 2005.

• Applies only where the company was already a party to the relevant debtor relationship immediately before its first accounting period beginning on or after 1 January 2005
• The normal rule treating shares issued or transferred on exercise of a deemed option as a chargeable gains event (section 653) is switched off
• Where a cash payment is made instead of a share disposal on exercise of the deemed option, the carrying value (CV) is treated as nil and an allowable loss equal to the amount X is recognised in that accounting period
• The normal rule dealing with the company ceasing to be party to the debtor relationship when the deemed option is not exercised (section 655) is also switched off