Corporation Tax Act 2009 section 586

Other contracts with embedded derivatives

Section 586 explains how embedded derivatives within contracts that are neither hybrid derivatives nor loan relationships are treated as separate relevant contracts for corporation tax purposes.

• Where a company splits a non-financial contract into embedded derivatives and remaining rights under accepted accounting practice, each embedded derivative is treated as a separate relevant contract
• The section applies only to contracts that are neither hybrid derivatives nor loan relationships
• Each deemed relevant contract is classified as an option, a future, or a contract for differences, depending on the nature of the embedded derivative
• Separate rules under section 616 may disapply fair value accounting for certain embedded derivatives