Derivative contracts: relevant contracts: overview
What is a ‘relevant contract’?
For a contract to come within the derivative contract rules within Part 7 CTA09, it must be a relevant contract that meets one of the ‘accounting conditions’ in CTA09/S579 (CFM50200 onwards), and is not excluded from the regime by any statutory provision (CFM50700 onwards).
A relevant contract is defined at CTA09/S577 as:
- an option,
- a future, or
- a contract for differences (CFD).
These three terms are defined in S580, S581 and S582 respectively of CTA09, and there is guidance at CFM50320 onwards about their meaning.
It is possible for a derivative to have other derivatives embedded within it. The legislation makes special provision for such ‘hybrid derivatives’ (CTA09/ S584) - see CFM50410.
CTA09/S585 (previously FA96/S94A) specifically treats derivatives embedded within loan relationships as relevant contracts. There is more detail on this at CFM50420.
CTA09/S586 performs a similar function for derivatives embedded in contracts other than loan relationships (see CFM50430).