Taxes Consolidation Act 1997 section 38

Certain State-guaranteed securities

Section 38 extends the favourable tax treatment of government securities to securities issued by bodies corporate where the State guarantees both the interest payments and the repayment of principal.

• Where a body corporate issues securities and a Minister of the Government guarantees both the interest and principal repayment under statutory authority, those securities are treated as if they were issued by the Minister for Finance under section 36. This means the interest may be paid without deduction of tax at source.
• Securities issued by the semi-State bodies listed in the Table to section 37, and securities issued by a company formed by the National Development Finance Agency, are excluded from this treatment.
• Although the interest is paid gross (without tax deducted at source), it remains chargeable to tax under Case III of Schedule D in the hands of the recipient, unless a specific exemption applies (for example, under section 49).
• Subject to Part 35D, the body corporate that issues State-guaranteed securities may deduct the gross interest paid on those securities when computing its profits or gains for corporation tax purposes under Case I of Schedule D.