Corporation Tax Act 2009 section 328G

Meaning of "relevant contingent contract" and "operative condition"

Section 328G defines what constitutes a "relevant contingent contract" and an "operative condition" in the context of contracts affected by currency movements.

• A relevant contingent contract is a contract whose effects depend on currency movements, but which is not an option because the holder has no choice over whether a particular provision is triggered.
• To qualify as a relevant contingent contract, the contract must contain an "operative condition" — a condition that alters any right or liability under the contract.
• The operative condition must be contingent on the exchange rate between the relevant foreign currency and the company's operating currency.
• The trigger for the condition may relate directly to an exchange rate, or indirectly — for example, it may relate to an asset whose value is closely tied to an exchange rate.