# Corporation Tax Act 2009, Section 496: Meaning of “hedging relationship”


(1) For the purposes of section 494, in relation to an open-ended investment company, a unit trust scheme or an offshore fund, there is a hedging relationship between a derivative contract (“the hedging instrument”) and an asset (“the hedged item”) so far as condition A or B is met.
(2) Condition A is that the hedging instrument and the hedged item are designated as a hedge by the company, scheme or fund.
(3) Condition B is that the hedging instrument is intended to act as a hedge of exposure to changes in fair value of a hedged item which is—
(a) a recognised asset which could affect the total net return of the company, scheme or fund, or
(b) an identified part of such an asset which is attributable to a particular risk.
(4) For the purposes of subsection (3) “the total net return” of a company, scheme or fund means its total net return calculated—
(a) in accordance with generally accepted accounting practice, or
(b) in the case of accounts prepared in a jurisdiction outside the United Kingdom, in accordance with generally accepted accounting practice in that jurisdiction.

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Source: https://www.legislation.gov.uk/ukpga/2009/4/section/496 (the official version)
Page: https://openlegislation.uk/corporation-tax-act-2009/section-496
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.