Corporation Tax Act 2009 section 413

Issue of funding bonds

Section 413 explains how the issue of funding bonds to a creditor in lieu of interest payments is treated for corporation tax purposes.

• When a body corporate, government, or public authority issues funding bonds to a creditor instead of paying interest on a debt, the issue is treated as a payment of interest
• The amount of interest deemed to have been paid equals the market value of the bonds at the time they are issued
• Funding bonds is a broad term covering bonds, stocks, shares, securities, and certificates of indebtedness
• Instruments that provide for payment in goods, services, or vouchers are excluded from the definition of funding bonds