Commentary on Sections Overview Chapter 8: Further provision about chargeable gains and derivative contracts Section 672: Treatment of net gains and losses on disposal of certain embedded derivatives
1873.This section modifies the amounts allowable under section 38 of TCGA on a disposal of the asset representing the creditor relationship mentioned in section 648 in a case where that section applies. It is based on paragraph 45HZA(1), (2), (3), (4) and (5) of Schedule 26 to FA 2002.
1874.For the circumstances in which section 648 applies, and for the meaning of an “exactly tracking contract for differences”, see the commentary on that section.
1875.As with section 670, this section in effect reverses the treatment of credits and debits in respect of the embedded derivative under section 641 so that double counting is avoided when the asset representing the creditor relationship is disposed of.
1876.And similarly again to that section and others, if the adjustment to be made under subsection (2) is a reduction that exceeds the amounts otherwise allowable under section 38 of TCGA, the excess is added to the consideration for the disposal.