CFM55030 - Derivative contracts: chargeable gains on derivatives: chargeable gains basis (S641)

CTA09/S641

Computation of chargeable gains or losses

CTA09/S641 sets out how you calculate the chargeable gain or allowable loss. There are three steps to computing the chargeable gain or loss:

  1. You compute the credits and debits which represent the company’s profits or losses on the derivative contract for the accounting period (in accordance with S595). This includes applying any special rules or anti-avoidance legislation where necessary. These are called ‘relevant credits’ and ‘relevant debits’.
  2. You then aggregate all the relevant credits for the accounting period to produce an overall credit, referred to as ‘C’, and similarly aggregate all the relevant debits, to get an amount ‘D’.
  3. If C exceeds D, the excess is a chargeable gain accruing to the company in the accounting period. If D exceeds C, the excess is an allowable loss.

There is no deemed disposal of an asset for the purposes of TCGA 1992 so any chargeable gain here is not reduced by indexation or any other form of capital gains relief.

Allowable losses arising on derivative contracts under CTA09/S641 can be carried back to a previous period - see CFM55040.