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Chapter BIM56880

Document Cited in Related
Vincent
Published date22 November 2013
Record NumberBIM56880

Financial transactions can involve not just the buying and selling of shares but also options, futures and contracts for differences (including swaps). These are known commercially as derivative contracts (see CFM13000 onwards). There is a difference between how we treat derivative contracts for tax purposes for companies and other taxpayers. The vast majority of derivative contracts entered into by companies are taxed within the specific Corporation Tax regime (see CFM50000 onwards). BIM56890 summarises the position for companies and deals with any cases which, exceptionally, do not fall within those rules.

Derivative contracts entered into for the purpose of a trade

An individual or other non-corporate entity may enter into derivative contracts for the purpose of a trade they carry on, for example to hedge exposure to exchange rates. If they do, the profits and losses from the derivative contract will be taken into account in calculating the profits of the trade. Similarly if a derivative contract is entered into in the course of a property income business, then the profits or losses from the contracts form part of the calculation of profits and losses from that business. See CFM50070.

Dealing in derivative contracts which amounts to a trade

An individual may contend that his dealings in derivative contracts...

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