Corporation Tax Act 2009 section 328F

Meaning of "option"

Section 328F broadens the definition of "option" for the purposes of the one-way exchange effect rules, ensuring that certain instruments which might not normally qualify as options under the derivative contracts regime are caught by these provisions.

• Cash-settled options, which would normally be classified as contracts for differences rather than options, are treated as options for the purposes of the one-way exchange effect rules.
• The scope of the embedded derivative rules is extended so that a financial instrument or contract is treated as containing an option if it includes provisions that could, viewed in isolation, be regarded as an option.
• It does not matter whether the embedded option element is closely related to the host contract under GAAP, or whether the company accounts for the option element separately.
• These wider definitions apply specifically for the one-way exchange effect provisions and the related rules in section 328E, ensuring companies cannot avoid those provisions through the particular form or accounting treatment of an option.