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Positive News for Intra-Group Debt Listings and the CISX
Earlier this year, a consultation paper was issued by the United Kingdom tax authorities, HM Revenue & Customs (HMRC), in relation to possible changes to taxation rules on interest. The proposals included:
- the removal of the quoted eurobond exemption from withholding for UK tax where notes or bonds are issued and held on an intra-group basis; and
- the introduction of a requirement to pay tax on non-cash (i.e. Payment in Kind) interest in cash rather than through funding bonds.
Following a significant number of responses from a wide cross section of business and the financial services industry, HMRC issued a follow up document on 2 October 2012 in which it announced the decision not to take forward a number of the original proposals, including the restrictions on the availability of the quoted eurobond exemption in intra-group financings and the requirement to pay tax on non-cash interest in cash. The UK government will however propose 'interest in kind' legislation in the Finance Bill 2013 (to be published later in 2012) which will require issuers paying interest in kind or by funding bonds to issue certificates regardless of whether it is required by the investor.
For a summary of the HMRC follow up document please click here.
If the proposals as originally presented had passed into law it would have adversely impacted the UK tax analysis of intra-group financing arrangements structured using eurobonds or notes either listed or planned to be listed on the Channel Islands Stock Exchange (the "CISX") or elsewhere. The clear statement from HMRC in its follow up document concerning the decision not to take forward the proposals mentioned above should enable issuers to plan and proceed with confidence in relation to future listings on the CISX, including in relation to listings which were postponed whilst issuers waited for clarification of HMRC's position.
Bedell Channel Islands Limited is a listing member of the CISX and has continued to see significant interest in listing of debt securities on the CISX to qualify for the quoted eurobond exemption during the past year, including acting on the largest note listing on the CISX in 2011.
For more information please visit www.bedellgroup.com