Explanatory note

Schedule 26 to the Finance Act 2002 (c. 23) (“Schedule 26”) makes provision relating to derivative contracts. Paragraph 13 of Schedule 26 confers power on the Treasury to amend provisions in that Schedule, and this Order exercises that power to make amendments. The Order makes provision for a new method of classifying derivative contracts, and the new classification has prompted a considerable number of consequential amendments in later paragraphs of Schedule 26. The Order also contains new provisions that apply if a contract moves in or out of the legislation applying to derivative contracts.

This Order begins with provisions of a general nature. Article 1 provides for citation, commencement, effect and interpretation; and article 2 provides for Schedule 26 to be amended.

Articles 3 to 9 provide for the amendment of paragraphs 2 to 12 of Schedule 26. Paragraph 2 of Schedule 26, in its amended form, and the new paragraphs 2A and 2B of Schedule 26 make provision for the new method of classifying derivative contracts.

Articles 10 to 28 provide for the amendment of Part 9 of Schedule 26. The new paragraph 43A of Schedule 26 contains provisions that apply to contracts which become derivative contracts, and the new paragraph 43B of Schedule 26 contains provisions that apply to contracts which cease to be derivative contracts.

Article 29 makes consequential amendments to paragraph 54 of Schedule 26 to insert a number of definitions applying generally in Schedule 26; and article 30 provides for the amendment of references to the Taxation of Chargeable Gains Act 1992 (c. 12).

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.