Section 658 Chargeable gain or allowable loss treated as accruing
United Kingdom
Subsection (2) applies if—
the debtor relationship mentioned in section 656(2) comes to an end, and
an amount (“the discharge amount”) is paid to discharge all the company's obligations under that relationship.
For the purposes of corporation tax on chargeable gains, a chargeable gain or allowable loss equal to the amount mentioned in subsection (3) is treated as accruing to the company.
That amount is the amount of the gain or loss (as the case may be) which would accrue on the assumptions in subsection (4).
Those assumptions are that—
the derivative contract is an asset of the company,
there is a disposal of that asset at the time when the debtor relationship comes to an end,
the consideration for the disposal of that asset is equal to the relevant amount, and
the cost of the asset is equal to the discharge amount.
In subsection (4) “the relevant amount” means—
if the company was a party to the debtor relationship at the time it was created, the amount of the proceeds of issue of the security representing that relationship, or
if the company became a party to the debtor relationship after that time, the amount of the F1tax-adjusted carrying value of the host contract at that time.
In this section “the host contract” means the loan relationship to which the company is treated as a party under section 415(2) (loan relationships with embedded derivatives) because of the debtor relationship.
Annotations
Textual amendments
- F1
Words in s. 658(5)(b) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 83
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)