Corporation Tax Act 2009 section 690

Derivative contracts for unallowable purposes

Section 690 prevents companies from obtaining corporation tax relief on credits and debits arising from derivative contracts that are held for unallowable purposes, such as tax avoidance.

• Where a derivative contract has an unallowable purpose, any exchange credits and any debits attributable to that purpose (on a just and reasonable apportionment) cannot be brought into account for corporation tax
• Where a credit would otherwise be reduced by an amount that would be treated as a debit, that reduction amount is itself treated as a disallowable debit referable to the unallowable purpose
• Accumulated net losses may still be allowable under section 692, providing partial relief from the disallowance of debits
• Amounts disallowed under this section are treated as having been dealt with under Part 7, meaning they cannot be relieved for corporation tax through any other route