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HMRC internal manual

Corporate Finance Manual

Old rules: derivative contracts: qualified exclusions: meaning of ‘return from contract’

Return from a contract, and associated transactions

This guidance applies to periods of account beginning before 1 January 2005, or beginning after that date and ending before 16 March 2005

For the purpose of Para 6(4), the amount of a return from

  • a relevant contract was taken as any amounts accruing to the company as respects the contract for an accounting period;
  • an asset representing a loan relationship was taken as the redemption amount (the amount that must be paid to discharge the money debt arising under the contract).

Where two or more persons entered into associated transactions (see below), the return accruing to each was the amount that accrued in relation to the contracts or assets held by that person.

Associated transactions: FA02/SCH26/PARA10

In a case where there was more than one contract or asset, it was immaterial that the contracts or assets were

  • held by different persons, or
  • that the other parties to them were different, or
  • that parties change during the currency of the contract or after issue of the asset,

so long as the transactions were entered into as part of the same scheme or arrangements (defined as associated transactions).

Transactions were part of the same scheme or arrangements if it was reasonable to assume from the likely effect of the transactions or the circumstances in which they were entered or acquired that one of them would not have been entered into independently of the others. Note there was no requirement that if two or more parties were involved in associated transactions that they must have been connected.

Scheme and arrangements included any understandings of any kind whether or not legally enforceable.