Corporation Tax Act 2009 section 400A

Adjustments for changes in index: relevant hedging schemes

Section 400A reduces or eliminates the upward adjustment to the carrying value of an index-linked gilt (or similar security) under section 400 where the inflation-linked capital return on that security has been hedged.

• Where a company holds an index-linked security and is party to a hedging scheme designed to neutralise the inflation-linked capital gain, the normal section 400 uplift to carrying value is restricted
• If the index-linked capital return is fully hedged, the carrying value increase is reduced to nil; if only partly hedged, it is reduced proportionately
• The return is considered "hedged" where a swap or other arrangement means the pre-tax economic profit or loss of the company (or its associated group) is unaffected by the inflation-linked return
• A "scheme" is defined very broadly, covering any arrangements or understanding, whether legally enforceable or not, involving one or more transactions