Section 661 | Contract which becomes derivative contract

(1)This section applies if—

(a)a company is a party to a relevant contract which (not having been a derivative contract) becomes a derivative contract, and

(b)immediately before the relevant contract becomes a derivative contract it is a chargeable asset.

(2)The company must bring into account for the accounting period in which it ceases to be a party to the relevant contract the amount of any chargeable gain or allowable loss which would have been treated as accruing to it on the assumptions in subsection (3).

(3)Those assumptions are that—

(a)the company disposed of the relevant contract immediately before the relevant time, and

(b)the disposal was for consideration of an amount equal to the notional carrying value of the relevant contract at that time.

(4)In this section “the relevant time” means the time when the relevant contract becomes a derivative contract.

(5)Section 622(4) (meaning of “notional carrying value”) applies for the purposes of this section.