Corporation Tax Act 2010 section 1012

Hedging arrangements

Section 1012 disapplies the section 1008 adjustment (which increases the principal secured to match the issue price) where hedging arrangements exist in relation to the issuing company's liabilities under a security.

• Where hedging arrangements relate to some or all of a company's liabilities under a security, the section 1008 uplift of principal secured to the issue consideration no longer applies.
• This disapplication takes effect from the time the hedging arrangements are in place, or from a later time if earlier hedging arrangements existed on or after 17 April 2002.
• Once section 1008 is disapplied, paragraph E in section 1000 operates as if the principal secured had never been increased — so the return on the security is measured against the original, lower principal secured amount.
• An exception to this disapplication is provided by section 1013, and the definition of "hedging arrangements" is found in section 1014.