Section 585 Loan relationships with embedded derivativesC1C2
United Kingdom
This section applies if in accordance with generally accepted accounting practice a company treats the rights and liabilities under a loan relationship to which it is a party as divided between—
rights and liabilities under a loan relationship, and
rights and liabilities under one or more derivative financial instruments or equity instruments (“embedded derivatives”).
The company is treated for the purposes of this Part—
as a party to a relevant contract whose rights and liabilities consist only of those of the embedded derivative, or
if there is more than one embedded derivative, as a party to relevant contracts each of whose rights and liabilities consist only of those of one of the embedded derivatives.
Each relevant contract to which a company is treated as a party under subsection (2) is treated for the purposes of this Part as an option, a future or a contract for differences depending on what the character of a separate contract containing the rights and liabilities of the embedded derivative would be.
For the corresponding treatment of the rights and liabilities within subsection (1)(a), see section 415 (loan relationships with embedded derivatives).
See also—
section 416 (election for section 415 and this section to apply), and
section 635 (some creditor relationships treated as ones in relation to which section 415 and this section have effect).
Annotations
Modifications
- C1
S. 585 excluded (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 3(2)(a) (with reg. 8)
- C2
S. 585 applied by 2010 c. 8, s. 493 (as inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1 (with Sch. 5 paras. 27, 32-34))
Notes on Part 7
Modifications
- C1
Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)
- C2
Pt. 7 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
- C3
Pt. 7 modified by 2007 c. 3, s. 809FZZ(8) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
- C4
Pt. 7 modified (for the tax year 2026-27 and subsequent tax years (but in relation to investment management services whenever performed)) by 2005 c. 5, Sch. A1 para. 35(6) (as inserted by Finance Act 2026 (c. 11), s. 58(6), Sch. 11 para. 1)