Commentary on Sections Overview Chapter 11: Tax avoidance Section 690: Derivative contracts for unallowable purposes
1905.This section prevents certain credits and debits being brought into account for corporation tax purposes, whether under this Part or otherwise, if the derivative contract in question has an “unallowable purpose”. It is based on paragraph 23(1), (2), (3), (8), (9) and (10) of Schedule 26 to FA 2002.
1906.Subsection (3) prevents a company bringing into account all debits in respect of the derivative contract that are referable to the unallowable purpose. But subsection (2) only does so for credits that are “exchange credits” (defined in subsection (6)).
1907.Subsection (4) signposts the relief in section 692, which provides that some of the debits mentioned in subsection (3) may be brought into account in the shape of “excess accumulated net losses”.
1908.Subsection (5) makes clear that an amount that is not brought into account because of this section (or section 692) is nevertheless regarded as brought into account for the purposes of the priority rule in section 699. That rule provides that this Part exhausts the corporation tax treatment of an amount to which it applies, unless otherwise stated. The amounts in question are therefore not to be brought into account for corporation tax purposes in any other way.