Corporation Tax Act 2009 section 641

Derivative contracts to be taxed on a chargeable gains basis

Section 641 requires certain derivative contracts to be taxed under the chargeable gains rules rather than as income, where the contract falls within one of four specified categories.

• Certain derivative contracts must be taxed on a chargeable gains basis rather than as trading income, covering contracts relating to land or tangible movable property, embedded derivatives which are options, exactly tracking contracts for differences, and property-based total return swaps.
• If the total relevant credits for the accounting period exceed the total relevant debits, a chargeable gain equal to the excess accrues to the company in that period.
• If the total relevant debits exceed the total relevant credits, an allowable loss equal to the excess accrues to the company in that period.
• An exception exists under section 642, and section 663 allows net losses on these contracts to be carried back to earlier periods.