# The Finance Act 2002, Schedule 26, Parts 2 and 9 (Amendment) Order 2005, Article 18: Amendment of Part 9 of Schedule 26 to the Finance Act 2002


After paragraph 45L insert—
“Treatment of host contract as a loan relationship
45M. (1) This paragraph applies where—
(a) a company is treated under paragraph 2(4) as party to a derivative contract,
(b) that contract is (within the meaning of paragraph 3(3)) treated for accounting purposes as a derivative financial instrument, and
(c) the underlying subject matter of that contract consists, or is treated as consisting, wholly of—
(i) shares in a company, or
(ii) rights of a unit holder under a unit trust scheme.
(2) Where this paragraph applies—
(a) the host contract shall be treated for the purposes of the Corporation Tax Acts as if it were a creditor relationship of the company which is a zero coupon bond, and
(b) the derivative contract shall be treated as satisfying the conditions in paragraph 4(2A).
(3) For the purposes of this paragraph a “zero coupon bond” is a security—
(a) whose issue price is less than the amount payable on redemption, and
(b) which does not provide for any amount to be payable by way of interest.
(4) Paragraph 9 applies for the purpose of determining whether the underlying subject matter is to be treated as consisting wholly of property referred to in sub-paragraph (1)(c).”.

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Source: https://www.legislation.gov.uk/uksi/2005/646/article/18 (the official version)
Page: https://openlegislation.uk/finance-act-2002-schedule-26-parts-2-and-9-amendment-order-2005/article-18
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.