Article 27 Amendment of paragraph 45M of Schedule 26

Amend paragraph 45M^f1 (treatment of host contract as a loan relationship) as follows.

For sub-paragraphs (1) and (2) substitute—

“(1)

This paragraph applies where for an accounting period—

(a)

a company is party to a hybrid derivative contract falling within paragraph 3(1)(b),

(b)

the nested derivative is a derivative contract falling within paragraph 3(1)(a),

(c)

the underlying subject matter of the derivative 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, and

(d)

the quasi-derivative host contract is treated for accounting purposes as, or as forming part of, a financial asset.

(2)

Where this paragraph applies—

(a)

the quasi-derivative host contract shall be treated for the purposes of the Corporation Tax Acts as if it were a creditor relationship of the company, and

(b)

the nested derivative shall be treated—

(i)

as satisfying the conditions in paragraph 4(2A), and

(ii)

as a chargeable asset (within the meaning of paragraph 4A(4)).”.

Omit sub-paragraphs (5) and (6).