Amendment of Part 2 of Schedule 26

Amendment of paragraph 12 of Schedule 26

9.—(1) Amend paragraph 12(1) (definition of terms relating to derivative contracts) as follows.

(2) For sub-paragraph (1) substitute—

“(1) This paragraph defines the following expressions for the purposes of this Schedule—

a capital redemption policy (see sub-paragraph (2));

a contract for differences (see sub-paragraphs (3) to (5));

a depositary receipt (in relation to shares) (see sub-paragraph (17));

designated (see sub-paragraph (13));

a future (see sub-paragraphs (6), (7) and (10));

a hedging relationship between a relevant contract and an asset or liability, in the case of any company (see sub-paragraph (14));

intangible fixed assets (see sub-paragraph (11));

Integrated Prudential Sourcebook (see sub-paragraph (15));

loan-contract embedded derivative (see sub-paragraph (11A));

loan-contract host contract (see sub-paragraph (11B));

long-term insurance fund (see sub-paragraph (16));

an option (see sub-paragraphs (8) and (10));

original asset (see sub-paragraph (11C));

original creditor relationship (see sub-paragraph (11D));

shares in a company (see sub-paragraph (12));

a warrant (see sub-paragraph (9))..”.

(3) After sub-paragraph (11) insert—

“(11A) ”Loan-contract embedded derivative” means a contract to which a company is treated as party by virtue of section 94A(2)(b) of the Finance Act 1996.

(11B) ”Loan-contract host contract” means a loan relationship to which a company is treated as party by virtue of section 94A(2)(a) of the Finance Act 1996.

(11C) ”Original asset” means an asset representing an original creditor relationship.

(11D) ”Original creditor relationship” means a loan relationship to which—

(a)a company is creditor, and

(b)section 94A of the Finance Act 1996 applies.”.

(4) In sub-paragraph (13) before “has the same meaning” insert “, except in paragraph 45G,”.

(5) In sub-paragraph (14) for paragraph (b) substitute—

“(b)in any other case—

(i)the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of the hedged item that is attributable to a particular risk and could affect the profit or loss of the company, and

(ii)the hedged item is an asset or liability recognised for accountancy purposes or is an identified portion of such an asset or liability.”.

(6) In sub-paragraph (16) for “and “contract of long-term insurance” have” substitute “has”.