Corporation Tax Act 2009 section 475A

Hedging relationship

Section 475A defines what constitutes a "hedging relationship" between a derivative contract and an asset or liability for the purposes of the corporation tax rules on derivative contracts.

• A hedging relationship exists where a company formally designates a derivative contract and an asset or liability as a hedge, or where the derivative is intended to hedge fair value exposure on a recognised asset or liability that could affect profit or loss.
• The derivative contract is referred to as the "hedging instrument" and the asset or liability being protected is the "hedged item".
• The hedged item can be a fully recognised asset or liability, or an identified portion of one.
• For the purposes of this definition, a company's own share capital is treated as a liability, meaning it can be a hedged item.