|
| |
|
(2) | In this Chapter “option” means— |
| |
(a) | an option relating to— |
| |
(i) | currency, shares, stock, securities or an interest rate, or |
| |
(ii) | rights under a commodity or financial futures contract, or |
| |
(b) | any other option which at the time of the disposal in question is listed |
| 5 |
on a recognised stock exchange or recognised futures exchange, |
| |
| and includes any liability or entitlement under an option within paragraph (a) |
| |
| |
(3) | In this Act “recognised futures exchange” means the London International |
| |
Financial Futures Exchange and any other futures exchange which is for the |
| 10 |
time being designated for the purposes of TCGA 1992 by order made by the |
| |
Board of Inland Revenue under section 288(6) of that Act. |
| |
When disposals involve guaranteed returns |
| |
559 | When disposals involve guaranteed returns |
| |
(1) | For the purposes of this Chapter, a disposal of a future or option involves |
| 15 |
guaranteed returns if conditions A to C are met. |
| |
(2) | Condition A is that the disposal is one of two or more related transactions (see |
| |
| |
(3) | Condition B is that those transactions are designed to produce a guaranteed |
| |
return (see subsection (5)). |
| 20 |
(4) | Condition C is that the guaranteed return comprises— |
| |
(a) | the return from the disposal (see section 561), or |
| |
(b) | the return from a number of disposals of futures or options, of which |
| |
the disposal is one, taken together. |
| |
(5) | For the purposes of this Chapter, two or more related transactions are |
| 25 |
transactions designed to produce a guaranteed return if, taking them together, |
| |
it would be reasonable to assume from one or more of the matters specified in |
| |
| |
(a) | the main purpose of the transactions is or was the production of a |
| |
guaranteed return from one or more disposals of futures or options (see |
| 30 |
| |
(b) | that is or was one of their main purposes. |
| |
| |
(a) | the likely effect of the transactions, |
| |
(b) | the circumstances in which the transactions are entered into, and |
| 35 |
(c) | the circumstances in which any one of the transactions is entered into. |
| |
(7) | In the case of a transaction which is a disposal, the references in subsection (6) |
| |
to entering into the transaction are references to making the disposal. |
| |
560 | Production of guaranteed returns |
| |
(1) | For the purposes of this Chapter, a guaranteed return is produced from a |
| 40 |
disposal of a future or option if risks from fluctuations in the underlying |
| |
subject matter are so eliminated or reduced as to produce a return from the |
| |
disposal that meets conditions A and B. |
| |
|
| |
|
| |
|
(2) | If there is more than one such disposal, a guaranteed return is produced from |
| |
them if, taking them together, such risks are so eliminated or reduced. |
| |
(3) | Condition A is that the amount of the return is not to any significant extent |
| |
attributable (otherwise than incidentally) to any such fluctuations. |
| |
(4) | Condition B is that the return equates, in substance, to the return on an |
| 5 |
investment of money at interest. |
| |
(5) | For the purposes of subsections (1) and (2), the cases where risks from |
| |
fluctuations in the underlying subject matter are eliminated or reduced include |
| |
any case where the main reason or one of the main reasons for the choice of that |
| |
| 10 |
(a) | that there appears to be no risk that it will fluctuate, or |
| |
(b) | that the risk that it will do so appears insignificant. |
| |
(6) | In this section the references, in relation to a disposal of a future or option, to |
| |
the underlying subject matter are references to, or to the value of, the |
| |
commodities, currencies, shares, stock or securities, interest rates, indices or |
| 15 |
| |
(a) | to which the future or option is referable, or |
| |
(b) | to the value of which it is referable. |
| |
561 | The return from one or more disposals |
| |
(1) | In this Chapter, references to the return from one or more disposals are |
| 20 |
references to the return on investment represented by— |
| |
(a) | the total net profits and gains arising from the disposal or disposals, or |
| |
(b) | all but an insignificant part of those net profits and gains. |
| |
(2) | For the purposes of subsection (1), if there are two or more disposals, it is to be |
| |
assumed that profits and gains realised, and losses made, by persons who are |
| 25 |
associated with each other are all realised or made by the same person. |
| |
(3) | For the purposes of subsection (2), persons are associated with each other in |
| |
relation to any two or more disposals if conditions A to C are met. |
| |
(4) | Condition A is that the disposals are made in pursuance of the same scheme or |
| |
| 30 |
(5) | Condition B is that each of the persons shares or is to share in the net return |
| |
represented by the total of all the profits, gains and losses realised or made on |
| |
| |
(6) | Condition C is that the extent of the persons’ shares is determined for the |
| |
purposes of, or in accordance with, the scheme or arrangements. |
| 35 |
(7) | For the purposes of this section— |
| |
(a) | “scheme or arrangements” includes understandings of any kind, and |
| |
(b) | it does not matter whether any scheme or arrangements are legally |
| |
| |
|
| |
|
| |
|
When disposals of futures and options occur |
| |
562 | When disposals of futures and options occur: general |
| |
(1) | Any question whether there is a disposal for the purposes of this Chapter, or |
| |
as to when such a disposal is made, is to be determined— |
| |
(a) | in accordance with sections 143(5) and (6), 144 and 144A of TCGA 1992 |
| 5 |
(closing out and settlement of futures contracts and rules in relation to |
| |
| |
(b) | otherwise in accordance with the provisions having effect for |
| |
determining for the purposes of TCGA 1992 whether or when an asset |
| |
has been disposed of, and |
| 10 |
(c) | on assumptions A to C. |
| |
(2) | Assumption A is that all futures are assets for the purposes of TCGA 1992. |
| |
(3) | Assumption B is that the words “in the course of dealing in commodity or |
| |
financial futures” are omitted from section 143(5) and (6) of TCGA 1992 in each |
| |
| 15 |
(4) | Assumption C is that any reference in TCGA 1992 to a financial option within |
| |
the meaning given by section 144(8) of that Act is a reference to any option that |
| |
at the time of the disposal in question is not listed on a recognised stock |
| |
exchange or recognised futures exchange (regardless of whether the conditions |
| |
in section 144(8)(c)(i) to (iv) of that Act are met). |
| 20 |
(5) | Subsection (1) is subject to section 563 (timing of certain grants of options |
| |
where related disposals occur later), and see also section 564 (deemed disposal |
| |
where futures run to delivery or options are exercised). |
| |
563 | Timing of certain grants of options where related disposals occur later |
| |
(1) | For the purpose of this Chapter, a disposal consisting in the grant of an option |
| 25 |
(“the grant”) is treated as taking place at a later time than it would be taken as |
| |
occurring under section 562 if conditions A to C are met. |
| |
(2) | Condition A is that the grant is one of a number of related transactions |
| |
designed to produce a guaranteed return. |
| |
(3) | Condition B is that at least one of the other transactions is a transaction entered |
| 30 |
| |
(4) | Condition C is that one or more of the transactions entered into after the grant |
| |
is a disposal which is not itself the grant of an option. |
| |
(5) | The grant is treated as taking place when the first such later disposal takes |
| |
| 35 |
(6) | Subsection (5) does not apply in any case where, by applying sections 144(2) |
| |
and 144A(2) of TCGA 1992, section 562(1)— |
| |
(a) | requires the grant of an option and the transaction entered into by the |
| |
grantor in fulfilment of the grantor’s obligations under the option to be |
| |
treated as a single transaction, or |
| 40 |
(b) | determines when such a single transaction is to be treated as entered |
| |
| |
| and that requirement or determination has a different effect from subsection |
| |
| |
|
| |
|
| |
|
564 | Deemed disposal where futures run to delivery or options are exercised |
| |
(1) | This section applies if there are two or more related transactions (see section |
| |
566) in relation to which conditions A and B are met. |
| |
(2) | Condition A is that one of the transactions is the creation or acquisition (by the |
| |
making or receiving of a grant or otherwise) of a future or option. |
| 5 |
(3) | Condition B is that the other transaction or one of the other transactions— |
| |
(a) | is the running of the future to delivery or the exercise of the option, and |
| |
(b) | is not treated for the purposes of this Chapter as a disposal of a future |
| |
| |
(4) | In relation to the parties to the future or option, this Chapter applies as if— |
| 10 |
(a) | a disposal of the future or option takes place at the time (“the relevant |
| |
time”) immediately before the future runs to delivery or, as the case |
| |
may be, the option is exercised, and |
| |
(b) | the scheme or arrangements by reference to which the transactions are |
| |
related transactions provide for the disposal. |
| 15 |
(5) | In the case of a person whose rights and entitlements under the future or |
| |
option have a market value at the relevant time, the disposal referred to in |
| |
subsection (4)(a) is taken to be for a consideration equal to that market value. |
| |
(6) | In the case of any other party to the future or option (“P”), the disposal is |
| |
| 20 |
(a) | to be made for a nil consideration, and |
| |
(b) | to involve P in incurring costs equal to the release amount. |
| |
(7) | In subsection (6) “the release amount” means the amount which P might |
| |
reasonably have been expected to pay, in a transaction at arm’s length entered |
| |
into at the relevant time, for the release of P’s obligations and liabilities under |
| 25 |
| |
(8) | Section 144(2) and (3) of TCGA 1992 are ignored for the purposes of |
| |
| |
565 | Interpretation of section 564 |
| |
(1) | References in section 564 to the running of a future to delivery are references |
| 30 |
to performing (and so discharging) the obligations owed under the commodity |
| |
or financial futures contract in question to the party to the future whose rights |
| |
as a party relate to the underlying subject matter. |
| |
(2) | In subsection (1) the reference to the underlying subject matter is a reference to, |
| |
or to the value of, the commodities, currencies, shares, stock or securities, |
| 35 |
interest rates, indices or other matters— |
| |
(a) | to which the future is referable, or |
| |
(b) | to the value of which it is referable. |
| |
(3) | In section 564 and this section “party”, in relation to a future or option, means |
| |
| 40 |
(a) | has any right or entitlement comprised in or arising under the future or |
| |
| |
(b) | is subject to any obligation or liability so comprised or arising. |
| |
|
| |
|
| |
|
(4) | In section 564 “market value” has the same meaning as in TCGA 1992 (see |
| |
| |
566 | When transactions are related |
| |
(1) | For the purposes of this Chapter, two or more transactions are related if all of |
| |
them are entered into in pursuance of the same scheme or arrangements. |
| 5 |
(2) | For this purpose the cases where any two or more transactions are to be taken |
| |
to be entered into in pursuance of the same scheme or arrangements include |
| |
any case where it would be reasonable to assume from one or more of the |
| |
matters specified in subsection (3) that none of them would have been entered |
| |
into independently of the others. |
| 10 |
| |
(a) | the likely effect of the transactions, |
| |
(b) | the circumstances in which the transactions are entered into, and |
| |
(c) | the circumstances in which any one of the transactions is entered into. |
| |
(4) | Nothing in this Chapter prevents transactions from being related transactions |
| 15 |
just because they are transactions— |
| |
(a) | with different parties, or |
| |
(b) | with parties different from the parties to the scheme or arrangements in |
| |
pursuance of which they are entered into. |
| |
(5) | In the case of a transaction which is a disposal, the references in this section to |
| 20 |
entering into the transaction are references to making the disposal. |
| |
(6) | In this section “scheme or arrangements” includes schemes, arrangements and |
| |
understandings of any kind, whether or not they are legally enforceable. |
| |
| |
| 25 |
(1) | This section applies if— |
| |
(a) | losses are made by a person from a disposal, and |
| |
(b) | had profits or gains arisen to the person from the disposal, they would |
| |
be chargeable under this Chapter. |
| |
(2) | The losses are not to be brought into account for income tax purposes, except |
| 30 |
where section 392 of ICTA (losses from miscellaneous transactions) applies. |
| |
(3) | For the purposes of that section, the losses are taken to be made at the time |
| |
when the disposal occurs. |
| |
(4) | For the treatment of the losses for capital gains tax purposes, and how TCGA |
| |
1992 applies where a profit arises or a loss is made from a deemed disposal |
| 35 |
under section 564(4), see sections 148A to 148C of that Act. |
| |
|
| |
|