Corporation Tax Act 2009 section 656

Introduction to section 658

Section 656 sets out the six conditions (A to F) that must all be met before a company's derivative contract can be subject to the chargeable gains treatment in section 658.

• The derivative contract must arise from splitting an embedded derivative out of a debtor relationship under section 585, and must be treated as a contract for differences (but not one already caught by section 652)
• The contract must be an "exactly tracking contract" (as defined in section 657), meaning the derivative's returns mirror the proceeds of issue of the underlying debt liability over the life of the relationship
• The underlying subject matter of the derivative contract must be shares
• The company must not be a bank or securities house that entered the debtor relationship in the ordinary course of that business, and must not be an excluded body