What does section 94 of the Income Tax (Trading and Other Income) Act 2005 do?

Section 94 provides a transitional exemption from the deemed disposal rules for futures and options transactions involving guaranteed returns. If a future ran to delivery or an option was exercised before 6th February 1998, it is not treated as a disposal under the guaranteed returns rules in Chapter 12 of Part 4 of the Act.

What is the cut-off date for the transitional exemption under section 94 ITTOIA 2005?

The cut-off date is 6th February 1998. Any future running to delivery or option exercised before that date is exempt from the deemed disposal provisions. Transactions occurring on or after 6th February 1998 fall within the scope of the deemed disposal rule in section 564 and may be subject to income tax.

How does section 94 relate to sections 564 and 565 of ITTOIA 2005?

Section 94 is to be read as though it formed part of section 564, which creates the deemed disposal rule for futures running to delivery or options being exercised. Section 565, which provides interpretation guidance for section 564, also applies when reading this transitional rule, governing the meaning of key terms.

Can you give an example of how the section 94 transitional exemption applies?

If an investor entered into a futures contract with a guaranteed return in October 1997 and the future ran to delivery in January 1998, this transaction is not treated as a disposal under the guaranteed returns rules. Had delivery occurred on or after 6th February 1998, any profit could have been subject to income tax.

Income Tax (Trading and Other Income) Act 2005 section 94

Disposals of futures and options involving guaranteed returns: certain pre-6th February 1998 transactions

Section 94 provides a transitional exemption from the deemed disposal rules for futures and options transactions involving guaranteed returns that took place before 6th February 1998.

A future running to delivery or an option being exercised before 6th February 1998 is not treated as a disposal under the guaranteed returns rules
This exemption applies specifically to the deemed disposal provisions in Chapter 12 of Part 4 of the Act
The provision is to be read as part of section 564, which creates the deemed disposal rule for futures running to delivery or options being exercised
Section 565, which provides interpretation guidance for section 564, also applies when reading this transitional rule

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member