Corporation Tax Act 2009 section 589

Contracts excluded because of underlying subject matter: general

Section 589 explains when a relevant contract is excluded from being treated as a derivative contract because of the nature of its underlying subject matter, so that its profits and losses fall outside the derivative contracts regime.

• A relevant contract is not a derivative contract if its underlying subject matter consists wholly of "excluded property" — namely intangible fixed assets, ordinary shares, or unit trust rights (with certain exceptions)
• Intangible fixed assets count as excluded property only where the contract is an option or a future, not for other types of relevant contract
• Shares and unit trust rights count as excluded property only if the contract meets one of five specified conditions and is not designed to produce a return equivalent to a commercial interest rate
• Certain shares are not treated as excluded property — specifically shares with guaranteed returns or third-party obligations, and shares in open-ended investment companies that are treated as loan relationships