Corporation Tax Act 2009 section 587

Contract relating to holding in OEIC, unit trust or offshore fund

Section 587 treats certain contracts linked to collective investment schemes as derivative contracts for corporation tax purposes, even where they would not otherwise qualify as such.

• A contract whose underlying subject matter includes shares in an OEIC, units in a unit trust, or an interest in an offshore fund may be treated as a derivative contract if the fund fails the qualifying investments test
• Once treated as a derivative contract, that treatment continues for all subsequent accounting periods in which the company remains a party to the contract, even if the original conditions no longer apply
• The qualifying investments test determines whether the fund holds a sufficient proportion of qualifying investments; failure of this test is the trigger for the contract to be brought within the derivative contracts regime
• Where this section applies, fair value accounting must be used and credits and debits are brought into account accordingly under section 601