Corporation Tax Act 2009 section 671

Meaning of G, L and CV in section 670

Section 671 defines the three key variables — G, L and CV — used in the gain and loss calculations under section 670 when a company exercises an option embedded in a loan relationship and acquires shares.

• G is the total of chargeable gains arising from the derivative contract across all relevant accounting periods, apportioned on a just and reasonable basis to the shares acquired on exercise of the option
• L is the total of allowable losses arising from the same derivative contract across all relevant accounting periods, apportioned on the same basis
• CV is the increase in the tax-adjusted carrying value of the host loan relationship between the date the company first became party to it (or the later date on which the embedded derivative rules began to apply) and the date the option is exercised
• Relevant accounting periods means every period from when the company first held the derivative contract up to and including the period in which the shares are disposed of