Corporation Tax Act 2009 section 416

Election for application of sections 415 and 585

Section 416 allows a company still using old UK GAAP to elect to split loan relationships with embedded derivatives into their separate components for tax purposes, even though old UK GAAP does not require or permit such separate treatment.

• A company using old UK GAAP that acquires loan relationships containing embedded derivatives may elect to treat them as separate host contracts and derivatives for tax purposes, mirroring the treatment available under international accounting standards or new UK GAAP.
• The election applies to all relevant assets the company holds at the time of the election and to any it acquires afterwards.
• Once the election is made, the tax rules on changes of accounting policy (sections 315 to 318) apply as though the company had changed its accounting approach, ensuring that any transitional adjustments are properly brought into account from the date the election takes effect.
• Key definitions anchor the provision: "old UK GAAP" means UK generally accepted accounting practice as it applied for periods of account beginning before 1 January 2005; "new UK GAAP" means UK GAAP as it applies for periods beginning on or after that date; and the "first relevant period of account" is the company's first period of account beginning on or after 1 January 2005.