Corporation Tax Act 2009 section 652

Introduction to sections 653 to 655

Section 652 sets out the qualifying conditions that a derivative contract must meet before the chargeable gains rules in sections 653 to 655 can apply to it.

• The derivative contract must arise from an embedded derivative that has been separated from a debtor relationship under the bifurcation rules, and must be treated as an option whose underlying subject matter is shares.
• The company must not have entered into the debtor relationship as part of its ordinary banking or securities house business — or must not have been carrying on such a business at all when it became party to the relationship.
• The company must not be an excluded body, and for these purposes the term "option" is given its general meaning and is not restricted by the usual rule that excludes cash-settled options from the definition.
• Transitional rules may disapply or modify sections 653 to 655 where the company was party to the debtor relationship before its first accounting period beginning on or after 1 January 2005.