Equity derivatives were brought into the derivative contracts
regime on 16 March 2005, where the company’s period of
account began on or after 1 January 2005 (and none of the
exceptions apply – see
CFM13110.) This means that some
derivatives over shares (or unit trust units) moved from being
chargeable gains assets to being derivative contracts.
FA02/SCH26/PARA4A provides that, where this is the case, the
company is deemed to have disposed of the contract at 3 pm on 16
March 2005. The disposal is deemed to take place at the accounting
value of the contract. The relevant accounting value is
not, however, that at
16 March 2005 – it is the value at the end of the
period of account immediately preceding the “new
period”.
For example, suppose that a company has a period of account
beginning on 1 February 2005. It holds an equity derivative on 31
January 2005, and is still party to the contract on 16 March 2005.
It is deemed to have disposed of the contract on 16 March, but at
its book value on 31 January 2005.
The resultant chargeable gain or loss is brought into account
when the company ceases to be a party to the contract.
CFM13124a gives examples of how Para 4A
operates.
For the purposes of Para 4A (and Paras 4B and 4C – see
CFM13126), “chargeable gains
asset” includes obligations under futures contracts to which
TCGA92/S143 applies, as well as a contract that is an asset under
the general principles of TCGA92/S21(1).
