Taxes Consolidation Act 1997 section 845C

Treatment of Additional Tier 1 instruments

Section 845C provides for the tax treatment of Additional Tier 1 capital instruments and equivalent instruments, clarifying that they are to be treated as debt for the purposes of the Tax Acts.

• Additional Tier 1 (AT1) instruments issued by regulated financial institutions under the Capital Requirements Regulation, and equivalent instruments issued by non-financial institutions, are treated as debt instruments for tax purposes.
• Coupon payments on AT1 and equivalent instruments are treated as interest and not as distributions or charges on income, thereby enabling a deduction for the coupon payments where the relevant criteria are met.
• Section 64, which provides for an exemption from withholding tax on interest paid on quoted Eurobonds, applies with any necessary modifications to AT1 and equivalent instruments, so that coupons may be paid without deduction of tax where the conditions of that section are satisfied.
• The section does not apply to any AT1 or equivalent instrument that forms part of an arrangement or scheme the main purpose, or one of the main purposes, of which is to avoid liability to tax.