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HMRC internal manual

Capital Gains Manual

Futures: scope of legislation: commodity/financial future defined

There is no definition of commodity or financial future in TCGA92/S143 (2)(a). Therefore, the expression must be given its ordinary meaning.

A commodity future is a contract made subject to the rules of a particular commodity or futures exchange to buy or to sell a standard quantity of a commodity of a standard quality at a specified price for collection or delivery at a specified time in the future, see CG56000.

For example, coffee futures are dealt in on the London International Financial Futures and Options Exchange (LIFFE). Futures are sold for the delivery of ten tonne units of Robusta Coffee for delivery in January, March, May, July, September or November.

A financial future is an agreement to sell a standard quantity of a specified financial instrument at a future date and at a price agreed between the parties. Some financial futures are based upon movements in interest rates or a financial index. As there is no underlying asset these contracts are settled by paying a cash difference reflecting the difference between the initial futures price contracted and the price of the underlying share, bond or index when the futures contract is settled.

Financial futures dealt in on the London International Financial Futures and Options Exchange (LIFFE) include futures on individual shares in a number of major companies, on gilts, on Japanese Government bonds, on the euro/US dollar rate, and on the FTSE 100 index.

The expression `commodity or financial future’ has a wide range of applications. Any case in which you consider a future traded on a recognised futures exchange may not be a commodity or financial future should be referred to Capital Gains Technical Group before you make any challenge.