Commentary on Sections Overview Chapter 8: Further provision about chargeable gains and derivative contracts Section 665: Introduction to section 666
1842.This section sets out the type of contract it applies to for the purposes of the relief provided by section 666. It is based on paragraphs 12(1) and (11A) and 45JA(1), (2) and (5) of Schedule 26 to FA 2002.
1843.For the purposes of this section, the definition of “option” in section 580 is shorn of its usual limiting conditions (that a cash-settled option is not an option).
1844.“Equity instrument” is defined in section 710 as having the meaning it does for accounting purposes. (See the commentary on section 585 for further detail.)
1845.For other rules that apply if a company is a party to an embedded derivative because of a debtor relationship of the company and the embedded derivative is treated as an option, see sections 652 to 655 in Chapter 7. They apply if the underlying subject matter of the embedded derivative is shares.