§ 1.—(1) Subject to sub-paragraph (2) below, profits and gains arising from a transaction to which this Schedule applies (including those which, apart from this sub-paragraph, would be taken to be of a capital nature) shall be treated, when realised—
- (a) as income of the person by whom they are realised; and
- (b) as chargeable to tax under Case VI of Schedule D for the chargeable period in which they are realised.
§ (2) Sub-paragraph (1) above does not apply to—
- (a) so much of any profits or gains arising to a person from a transaction as are charged to tax in his case under Case I or V of Schedule D;
- (b) any profits or gains arising to a company which is a qualifying company from a transaction which, as regards that company, is or is deemed to be a qualifying contract; or
- (c) any profits or gains arising to an authorised unit trust (within the meaning of section 468).
§ (3) In sub-paragraph (2) above—
'qualifying company' means a qualifying company for the purposes of Chapter II of Part IV of the Finance Act 1994 (interest rate, currency and debt contracts); and
'qualifying contract' means a qualifying contract for those purposes.
§ (4) For the purposes of this Schedule the profits and gains arising from a transaction to which this Schedule applies are to be taken to be realised at the time when the disposal comprised in the transaction takes place.
§ (5) For the purposes of sections 392 and 396 any loss in a transaction to which this Schedule applies is to be taken to be sustained at the time when, in accordance with sub-paragraph (4) above, any profits or gains arising from that transaction would have been realised.
§ (6) Subject to sub-paragraph (7) below, the following, namely—
- (a) profits and gains to which sub-paragraph (1) above applies, and
- (b) losses in transactions the profits and gains from which (if there were any) would be profits and gains to which that sub-paragraph applies, shall not be brought into account for the purposes of income tax, corporation tax or capital gains tax except by virtue of this Schedule and, in the case of losses, section 392 or 396.
§ (7) Nothing in sub-paragraph (6) above shall prevent any amount from being brought into account in accordance with section 83 of the Finance Act 1989 (receipts to be brought into account in any Case I computation made in respect of life insurance).
§ Transactions to which Schedule applies
§ 2.—(1) This Schedule applies to a transaction if—
- (a) it is a disposal of futures or options;
- (b) it is one of two or more related transactions designed to produce a guaranteed return; and
- (c) the guaranteed return comprises the return from that disposal or from a number of disposals of futures or options, of which that disposal is one, taken together.
§ (2) For the purposes of this Schedule two or more related transactions are transactions designed to produce a guaranteed return if, taking the transactions together, it would be reasonable to assume, from either or both of—
- (a) the likely effect of the transactions, and
- (b) the circumstances in which the transactions are entered into, or in which any of them is entered into,
§ that their main purpose, or one of their main purposes, is or was the production of a guaranteed return from one or more disposals of futures or options.