# Corporation Tax Act 2009, Section 645: Creditor relationships: embedded derivatives which are options


(1) This section applies to a derivative contract of a company for an accounting period if each of conditions A to E is met.
(2) Condition A is that the derivative contract is a relevant contract to which the company is treated as a party under section 585(2) (loan relationships with embedded derivatives) because of a creditor relationship of the company.
(3) Condition B is that the derivative contract is treated as an option by section 585(3) (contract treated as option, future or contract for differences).
(4) Condition C is that the underlying subject matter of the derivative contract—
(a) is qualifying ordinary shares, or
(b) is mandatorily convertible preference shares.
(5) Condition D is that the company is not a party to the creditor relationship at any time in the accounting period for the purposes of a trade carried on by it.
(6) Condition E is that the company is not an excluded body.
(7) Where this section applies to a derivative contract, the asset representing the creditor relationship is treated for corporation tax purposes as not being a qualifying corporate bond.
(8) See also—
(a) section 647 (meaning of certain expressions in this section), and
(b) section 670 (treatment of net gains and losses on exercise of option).

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Source: https://www.legislation.gov.uk/ukpga/2009/4/section/645 (the official version)
Page: https://openlegislation.uk/corporation-tax-act-2009/section-645
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.