Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Derivatives definition

What does Derivatives mean? Derivatives are contracts used to transfer or manage risk, whose value is determined by an underlying asset, interest rate, currency, index, commodity, security or credit event. Common types include futures, options, swaps (interest rate and currency), forwards and credit derivatives (such as credit default swaps), traded on exchanges or over the counter. Legally, derivatives create payment or delivery obligations calculated by reference to the underlying. They are typically documented under an ISDA Master Agreement with a Credit Support Annex for collateral, and depend on close-out netting upon default. Key issues include counterparty capacity and authority, governing law and jurisdiction,...

UK corporation tax on derivative contracts: Part 7 CTA 2009, Disregard Regulations, hedging, foreign exchange, embedded derivatives, group transfers, anti-avoidance and chargeable gains basis; trading vs non-trading treatment

Published by a LexisNexis Tax expert

Practice notes

The derivative contracts regime

The derivative contracts regime sets out how a company’s Profits and losses from its ‘derivative contracts’ are taxed and relieved. The principal provisions appear in Part 7 of the Corporation Tax Act 2009 (CTA 2009) and, in this Practice Note, are called Part 7. Relevant secondary legislation includes the ‘Disregard Regs’—the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of profits and Losses) Regulations 2004, SI 2004/3256, as amended. This Practice Note explains how profits and losses from a company’s derivative contracts are calculated and recognised for corporation tax.

For the definition of a ‘derivative contract’ for corporation tax and the instruments and transactions within the scope of the derivative contracts Rules, see Practice Note: Taxation of Derivatives—what are derivative contracts?

For deeper analysis of particular features of the rules, see these Practice Notes:

Taxation of derivatives—chargeable gains basis rules
Taxation of derivatives—anti-avoidance
Taxation of derivatives—embedded derivatives
Taxation of derivatives—hedging

This Practice Note does not cover the taxation of insurance business or life companies...

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Web page updated on 21/05/2026

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