![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |
United Kingdom Statutory Instruments |
||
You are here: BAILII >> Databases >> United Kingdom Statutory Instruments >> The Finance Act 2002, Schedule 26, (Parts 2 and 9) (Amendment) Order 2006 No. 3269 URL: https://www.bailii.org/uk/legis/num_reg/2006/20063269.html |
[New search] [Help]
Made | 7th December 2006 | ||
Laid before the House of Commons | 8th December 2006 | ||
Coming into force | 30th December 2006 |
(2B) In this Schedule "plain vanilla contract" means a relevant contract other than one to which a company is treated as being party by virtue of a provision mentioned in sub-paragraph (2A).".
Insertion of paragraphs 2A and 2B of Schedule 26
4.
After paragraph 2 insert—
(2) The company is to be treated for the purposes of this Schedule as—
(3) Each relevant contract to which the company is treated as party under sub-paragraph (2) is to be treated as an option, a future, or a contract for differences according to whether the rights and liabilities of the embedded derivative would be of that character if contained in a separate contract.
Hybrid derivatives
2B.
—(1) This paragraph applies where—
(c) a contract consisting of only those remaining rights and liabilities would be a relevant contract.
(2) The company is to be treated for the purposes of this Schedule as—
Amendment of paragraph 3 of Schedule 26
5.
—(1) Amend paragraph 3[3] (contracts to satisfy accounting requirements etc.) as follows.
(2) In sub-paragraph (1)(a) omit "financial instrument".
(3) In sub-paragraph (2)(b)(iv) for "and" substitute "or".
(4) In sub-paragraph (3) omit "financial instrument".
(5) In sub-paragraph (5)—
Amendment of paragraph 4 of Schedule 26
6.
—(1) Amend paragraph 4[4] (contracts excluded by virtue of their underlying subject matter) as follows.
(2) In sub-paragraph (2)(b) after "(2C)" insert ", (2CA)".
(3) For sub-paragraph (2A) substitute—
(4) In sub-paragraph (2B)—
(5) After sub-paragraph (2C) insert—
(b) the relevant contract is—
(c) the relevant contract is not a loan-contract embedded derivative; and
(d) the shares to be acquired or delivered constitute, or would (if acquired or delivered) constitute a substantial shareholding within the meaning of paragraph 8 of Schedule 7AC to TCGA 1992.".
Substitution of paragraph 4C of Schedule 26
7.
For paragraph 4C[5] substitute—
(2) For the purposes of computing any chargeable gain accruing to the company on the disposal—
(3) If the amount of the excess in sub-paragraph (2)(b)(ii) is greater than the amount of expenditure allowable under section 38(1)(a) of TCGA 1992, the amount of the excess that cannot be deducted from the expenditure shall, for the purpose mentioned in sub-paragraph (2), be added to the amount of the consideration for the disposal.
(4) In this paragraph—
(5) For the purposes of sub-paragraph (4) a "relevant accounting period" is—
Amendment of paragraph 9 of Schedule 26
8.
—(1) Amend paragraph 9[6] (underlying subject matter which is subordinate or of small value disregarded) as follows.
(2) In sub-paragraph (1) omit "or (4)".
(3) Omit sub-paragraph (4).
(4) In sub-paragraph (5)—
Amendment of paragraph 12 of Schedule 26
9.
—(1) Amend paragraph 12[7] (definition of terms relating to derivative contracts) as follows.
(2) For sub-paragraph (1) substitute—
(3) After sub-paragraph (11) insert—
(4) In sub-paragraph (13) before "has the same meaning" insert ", except in paragraph 45G,".
(5) In sub-paragraph (14) for paragraph (b) substitute—
(6) In sub-paragraph (16) for “and "contract of long-term insurance" have“ substitute "has".
(2) The company shall, when it ceases to be a party to the relevant contract, bring into account (for the accounting period in which it ceases to be party to the relevant contract) the amount of any chargeable gain or allowable loss treated as accruing to the company on the assumption—
(3) For the purposes of this paragraph an asset is a chargeable asset if any gain accruing on the disposal of the asset by the company would be a chargeable gain for the purposes of TCGA 1992 (and includes any obligations under futures contracts which, by virtue of section 143 of that Act, are regarded as assets to the disposal of which that Act applies).
(4) For the purposes of this paragraph "the relevant time" means the time, on or after 30th December 2006 at which the relevant contract becomes a derivative contract.
(5) For the purposes of this paragraph the "notional carrying value" of a contract at any time is the amount which would have been the carrying value of the contract in the accounts of the company if an accounting period had ended immediately before that time.
Contracts which cease to be derivative contracts
43B.
—(1) This paragraph applies if a company is party to a relevant contract which (having been a derivative contract) ceases to be a derivative contract.
(2) The company is to be treated—
Omission of paragraphs 44 and 45 of Schedule 26
11.
Omit paragraphs 44 and 45.
Amendment of paragraph 45C of Schedule 26
12.
In paragraph 45C[8] (derivative contracts relating to land or certain tangible movable property) omit sub-paragraphs (1)(d) and (1A).
Amendment of paragraph 45D of Schedule 26
13.
—(1) Amend paragraph 45D[9] (creditor relationships: embedded derivatives which are options) as follows.
(2) In sub-paragraph (1) for paragraphs (a) to (c) substitute—
(3) In sub-paragraph (2)(a) for "creditor relationship" substitute "original relationship".
(4) For sub-paragraph (2)(f) substitute—
(5) In sub-paragraph (3)(a) for "creditor relationship" substitute "original relationship".
(6) In sub-paragraph (3A) for "paragraph" substitute "Schedule and Chapter 2 of Part 4 of the Finance Act 1996".
(7) In sub-paragraph (8) for "creditor relationship" substitute "original relationship".
Amendment of paragraph 45E of Schedule 26
14.
In paragraph 45E[10] (exclusions from paragraph 45D) omit sub-paragraph (2).
Amendment of paragraph 45F of Schedule 26
15.
—(1) Amend paragraph 45F[11] (creditor relationships: embedded derivatives which are exactly tracking contracts for differences) as follows.
(2) In sub-paragraph (1) for paragraphs (a) to (c) substitute—
(3) In sub-paragraph (2)(a) for "creditor relationship" substitute "original relationship".
(4) In sub-paragraph (2)(c) omit sub-paragraph (i).
(5) For sub-paragraph (2)(f) substitute—
(6) In sub-paragraph (3)(a) for "creditor relationship" substitute "original relationship".
(7) In sub-paragraph (4), in the definition of "C", for "the asset which represents the creditor relationship" substitute "the original asset".
(8) In sub-paragraph (6)—
(9) In sub-paragraph (8) for "creditor relationship" substitute "original relationship".
Amendment of paragraph 45FA of Schedule 26
16.
For paragraph 45FA[12] (creditor relationships: existing assets) substitute—
(5) Where—
the reference in sub-paragraph (4) to the disposal of the original asset includes a reference to the disposal of the asset which, as a result of the reorganisation, has become the new holding for the purposes of those sections.
(6) For the purposes of TCGA 1992 the amount or value of the consideration for any disposal by a company of the original asset—
but this sub-paragraph does not apply in a case where paragraph 45F would apply but for sub-paragraph (2)(f) of that paragraph.
(7) For the purposes of sub-paragraph (6), "relevant exchange gains" and "relevant exchange losses" are—
(8) Where the amount of the relevant exchange gains falling to be deducted under sub-paragraph (6)(b) exceeds the amount required to reduce the amount or value of the consideration to nil, the excess shall be treated for the purposes of section 38(1)(c) of TCGA 1992 as incidental costs of making the disposal of the original asset.".
Amendment of paragraph 45H of Schedule 26
17.
—(1) Amend paragraph 45H[13] as follows.
(2) In sub-paragraph (2) for paragraph (a) substitute—
(3) In sub-paragraph (3) for "asset representing the associated creditor relationship" substitute "original asset".
(4) After sub-paragraph (5) insert—
(5) In sub-paragraph (6), in the definition of "G", for paragraph (a) substitute—
(6) In sub-paragraph (7) for paragraph (a) substitute—
Insertion of paragraph 45HZA of Schedule 26
18.
After paragraph 45H insert—
(2) For the purpose of computing any chargeable gain accruing to the company on the disposal, the sums allowable as a deduction under section 38(1)(a) of TCGA 1992 (acquisition costs) shall—
(3) If the amount of the excess in sub-paragraph (2)(b) is greater than the amount of expenditure allowable under section 38(1)(a) of TCGA 1992, the amount of the excess that cannot be deducted from the expenditure so allowable shall, for the purpose mentioned in sub-paragraph (2), be added to the amount of the consideration for the disposal.
(4) Sections 37 and 39 of TCGA 1992 do not apply in relation to the disposal.
(5) In this paragraph—
(6) For the purposes of paragraph (5)—
Amendment of paragraph 45HA of Schedule 26
19.
—(1) Amend paragraph 45HA [14] as follows.
(2) For sub-paragraph (1) and the heading preceding paragraph 45HA substitute—
(1A) This paragraph also applies where—
(4) In sub-paragraph (4), in the definition of "G", for "sub-paragraph (1)(b)" substitute "sub-paragraph (1)(c) or the delivery mentioned in sub-paragraph (1A)(c)".
Amendment of paragraph 45I of Schedule 26
20.
—(1) Amend paragraph 45I[15] (index-linked gilt-edged securities with embedded contracts for differences) as follows.
(2) In sub-paragraph (1) for paragraph (a) substitute—
(3) In sub-paragraph (1)(c) for "equivalent deemed loan relationship" substitute "loan-contract host contract".
(4) In sub-paragraph (1) omit paragraph (d).
(5) In sub-paragraph (1)(e) for the words from the beginning to "that section" substitute "the derivative contract is treated by virtue of section 94A(3) of the Finance Act 1996".
(6) In sub-paragraph (3) omit the definition of "the equivalent deemed loan relationship".
Amendment of paragraph 45J of Schedule 26
21.
—(1) Amend paragraph 45J[16] (issuers of securities with embedded derivatives: deemed options) as follows.
(2) In sub-paragraph (1) for paragraphs (a) and (b) substitute—
(3) In sub-paragraph (1)(c) for the words from the beginning to "that section" substitute "the derivative contract is treated by virtue of section 94A(3) of the Finance Act 1996".
(4) In sub-paragraph (2)(a), in both places, and in sub-paragraph (4) for "debtor" substitute "original".
(5) In sub-paragraph (3B) for "(9)" substitute "(9A)".
(6) For sub-paragraphs (8) and (9) substitute—
(9) Sub-paragraph (9A) applies if the company ceases to be a party to the original relationship at a time when the option mentioned in sub-paragraph (1)(c) has not been exercised.
(9A) The company is treated for the purposes of corporation tax on chargeable gains—
(9B) In sub-paragraph (9A)—
Amendment of paragraph 45JA of Schedule 26
22.
—(1) Amend paragraph 45JA[17] (issuers of securities with embedded derivatives: equity instruments) as follows.
(2) In sub-paragraph (1)—
(b) in paragraph (b) for "subsection (1) of that section in the case of that debtor relationship" substitute "section 94A(1) of the Finance Act 1996 in the case of the original relationship", and
(c) in paragraph (b)(ii), at the end, insert "of the company".
(3) Omit sub-paragraph (1)(e).
(4) In sub-paragraph (1)(f) for "loan" substitute "original".
(5) In sub-paragraphs (2)(a), in both places, and (2)(b) for "debtor" substitute "original".
(6) In sub-paragraph (4) for the definition of "RA" substitute—
(7) In sub-paragraph (4), in the definition of "E", for "debtor" substitute "original".
Amendment of paragraph 45K of Schedule 26
23.
—(1) Amend paragraph 45K[18] (issuers of securities with embedded derivatives: deemed contracts for differences) as follows.
(2) In sub-paragraph (1)—
(3) For sub-paragraph (1)(d) substitute—
(4) In sub-paragraphs (2)(a), in both places, and (2)(e) for "debtor" substitute "original".
(5) In sub-paragraph (2)(c) omit "land (wherever situated) or".
(6) After sub-paragraph (2) insert—
(2B) In sub-paragraph (2A), the reference to a relevant percentage change in the value of the underlying subject matter of the contract is a reference to the percentage change (if any) over the relevant period in—
(2C) In sub-paragraph (2B) "the relevant period" means—
(b) any other period in which almost all of that period is comprised, and which differs from that period exclusively for purposes connected with giving effect to a valuation in relation to rights or liabilities under the liability representing the original relationship.".
(7) In sub-paragraphs (3A)(a) and (3B)(b) for "debtor" substitute "original".
(8) In sub-paragraph (3B) for paragraph (c) substitute—
Insertion of paragraph 45KA of Schedule 26
24.
After paragraph 45K insert—
Amendment of paragraph 45L of Schedule 26
25.
—(1) Amend paragraph 45L[19] (derivatives not embedded in a loan relationship) as follows.
(2) In sub-paragraph (1) for the words from the beginning to the end of paragraph (a) substitute—
(3) For sub-paragraph (1A) substitute—
(4) In sub-paragraph (1B)(b) for the words from "whether" to the end substitute "whether that contract is a hybrid derivative or a non-financial contract".
(5) In sub-paragraph (1C)—
(6) In sub-paragraph (2)—
(c) insert the following words after paragraph (b) (but not as part of that paragraph)—
Amendment of paragraph 45LA of Schedule 26
26.
In paragraph 45LA[20] (elections under paragraph 45L(2A): further provisions) in sub-paragraph (4)(a) for "paragraph 2(4)" substitute "paragraph 2A or 2B".
Amendment of paragraph 45M of Schedule 26
27.
—(1) Amend paragraph 45M[21] (treatment of host contract as a loan relationship) as follows.
(2) For sub-paragraphs (1) and (2) substitute—
(d) the quasi-derivative host contract is treated for accounting purposes as, or as forming part of, a financial asset.
(2) Where this paragraph applies—
(3) Omit sub-paragraphs (5) and (6).
Amendment of paragraph 50A of Schedule 26
28.
In paragraph 50A[22] (adjustment on company changing to international accounting standards), in sub-paragraph (3B)(b), for "paragraphs 21 and 28" substitute "paragraph 28".
(3) Omit the definition of "embedded derivative contract"[24].
Amendment of references to the Taxation of Chargeable Gains Act 1992
30.
—(1) In the specified provisions of Schedule 26, for "the Taxation of Chargeable Gains Act 1992"[25] substitute "TCGA 1992".
(2) In paragraph (1) "the specified provisions" means paragraph 4A(4),[26] paragraph 45A(6), paragraph 45B(8), sub-paragraphs (7) and (8) of paragraph 45D, paragraph 45F(8), sub-paragraphs (2)(b)(ii), (3), (4) and (5) of paragraph 45H,[27] sub-paragraphs (2) and (3) of paragraph 45HA, paragraph 45J(5)(a)[28] and paragraph 45LA(6).
Dave Watts
Frank Roy
Two of the Lords Commissioners of Her Majesty's Treasury
7th December 2006
[3] Paragraph 3 was amended by article 3 of S.I. 2004/2201, article 3 of S.I. 2005/646 and article 4 of S.I. 2005/2082.back
[4] Paragraph 4 was amended by article 4 of S.I. 2004/2201, article 4 of S.I. 2005/646, article 5 of S.I. 2005/2082 and article 5 of S.I. 2005/3440.back
[5] Paragraph 4C was inserted by article 6 of S.I. 2005/2082.back
[6] Paragraph 9 was amended by article 11 of S.I. 2004/2201 and article 7 of S.I. 2005/646.back
[7] Paragraph 12 was amended by article 13 of S.I. 2004/2201, article 9 of S.I. 2005/646, article 8 of S.I. 2005/2082 and article 6 of S.I. 2005/3440.back
[8] Paragraph 45C was inserted by article 15 of S.I. 2004/2201 and amended by article 8 of S.I. 2005/3440.back
[9] Paragraph 45D was inserted by article 15 of S.I. 2004/2201 and amended by article 13 of S.I. 2005/2082.back
[10] Paragraph 45E was inserted by article 15 of S.I. 2004/2201 and amended by article 14 of S.I. 2005/2082.back
[11] Paragraph 45F was inserted by article 15 of S.I. 2004/2201 and amended by article 7 of S.I. 2004/3270, by article 15 of S.I. 2005/646 and by article 15 of S.I. 2005/2082.back
[12] Paragraph 45FA was inserted by article 16 of S.I. 2005/2082.back
[13] Paragraph 45H was inserted by article 17 of S.I. 2005/2082 and amended by article 9 of S.I. 2005/3440.back
[14] Paragraph 45HA was inserted by article 17 of S.I. 2005/2082 and amended by article 10 of S.I. 2005/3440.back
[15] Paragraph 45I was inserted by article 15 of S.I. 2004/2201.back
[16] Paragraph 45J was inserted by article 10 of S.I. 2004/3270 and amended by article 16 of S.I. 2005/646, article 18 of S.I. 2005/2082 and article 11 of S.I. 2005/3440.back
[17] Paragraph 45JA was inserted by paragraph 19 of S.I. 2005/2082.back
[18] Paragraph 45K was inserted by article 10 of S.I. 2004/3270 and amended by article 17 of S.I. 2005/646 and article 20 of S.I. 2005/2082.back
[19] Paragraph 45L was inserted by article 10 of S.I. 2004/3270 and amended by article 21 of S.I. 2005/2082 and article 12 of S.I. 2005/3440.back
[20] Paragraph 45LA was inserted by article 13 of S.I. 2005/3440.back
[21] Paragraph 45M was inserted by article 18 of S.I. 2005/646 and amended by article 22 of S.I. 2005/2082 and article 14 of S.I. 2005/3440.back
[22] Paragraph 50A was inserted by paragraph 67 of Schedule 10 to the Finance Act 2004 (c. 12). Sub-paragraphs (3A) and (3B) were inserted by article 12 of S.I. 2004/3270.back
[23] Paragraph 54(1) was amended by article 15 of S.I. 2005/3440; there are other amendments but none is relevant.back
[24] The definition of "embedded derivative contract" was inserted by article 15 of S.I. 2005/3440.back
[26] Paragraph 4A was inserted by article 15 of S.I. 2004/2201.back
[27] Paragraphs 45A to 45I were inserted by article 15 of S.I. 2004/2201. Paragraph 45D(8) was substituted by article 13(5) of S.I. 2005/2082, paragraph 45F(8) was substituted by article 15(4) of S.I. 2005/2082, and paragraph 45H(2)(b)(ii) was substituted by article 9(3) of S.I. 2005/3440.back
[28] Paragraph 45J was inserted by article 10 of S.I. 2004/3270 and relevantly amended by article 18(4) of S.I. 2005/2082.back
© Crown copyright 2006