Corporation Tax Act 2009 section 665

Introduction to section 666

Section 665 sets out the six conditions (A to F) that must all be met before a company can claim the allowable loss relief provided by section 666, in relation to embedded derivatives within debt instruments that contain an equity element.

• The company must be the debtor under a loan relationship that contains an embedded derivative treated as an option, where the embedded element is split between a straightforward loan and an equity instrument of the company
• The company must have made a payment to the creditor during the accounting period to discharge obligations under the debtor relationship
• When the company entered into the debtor relationship, it must not have been acting in the ordinary course of a banking or securities house business
• The company must not be an excluded body, and for these purposes the term "option" is given a broader meaning than the usual definition used elsewhere in the derivative contracts legislation