Section 690 | Derivative contracts for unallowable purposes

(1)This section applies if in any accounting period a derivative contract of a company has an unallowable purpose.

(2)The company may not bring into account for that period for the purposes of this Part so much of any exchange credit in respect of that contract as is referable to the unallowable purpose on a just and reasonable apportionment.

(3)The company may not bring into account for that period for the purposes of this Part so much of any debit in respect of that contract as is referable to the unallowable purpose on a just and reasonable apportionment.

(3A)If—^F1

(a)a credit brought into account for that period for the purposes of this Part by the company would (in the absence of this section) be reduced, and^F1

(b)the reduction represents an amount which, if it did not reduce a credit, would be brought into account as a debit in respect of that contract,^F1

subsection (3) applies to the amount of the reduction as if it were an amount that would (in the absence of this section) be brought into account as a debit.

(4)Subsections (2) and (3) are subject to section 692 (allowance of accumulated net losses).

(5)An amount which would be brought into account in accordance with this Part as respects any matter apart from this section and section 692—

(a)is treated for the purposes of section 699(1) (priority of this Part for corporation tax purposes) as if it were so brought into account, and

(b)accordingly may not be brought into account for any other corporation tax purposes as respects that matter.

(6)For the purposes of this section and section 692, a credit is an exchange credit, in the case of any company, so far as it is attributable to any exchange gains arising to the company ... .^F2

(7)For the meaning of “has an unallowable purpose” and “the unallowable purpose” in this section and section 692, see section 691.