Corporation Tax Act 2009 section 591

Conditions A to E mentioned in section 589(5)

Section 591 sets out five conditions (A to E) that determine when a derivative contract whose underlying subject matter is shares or unit trust rights is excluded from the derivative contracts tax regime and instead falls within the chargeable gains rules.

• Condition A covers certain plain vanilla approved derivatives held by life insurers that are not treated as financial assets or liabilities under accounting standards
• Conditions B and C exclude contracts held outside a company's trade where there is a hedging relationship with shares, share capital, or related liabilities, or where the contract is a listed option to subscribe for shares
• Condition D excludes options or futures over substantial shareholdings that are not part of the company's core trading activities, even where the company is a financial trader
• Condition E excludes contracts that hedge a loan relationship containing an embedded derivative, provided each embedded derivative is already taxed under the chargeable gains rules