Corporation Tax Act 2009 section 414

Redemption of funding bonds

Section 414 prevents the redemption (repayment) of funding bonds from being treated as a payment of interest for corporation tax purposes, where the original issue of those bonds was already treated as an interest payment.

• When funding bonds are redeemed, that redemption is not treated as a payment of interest for corporation tax purposes, provided the original issue was already taxed as interest.
• This rule applies where the issue of the bonds was treated as interest under section 413 of CTA 2009 (for corporation tax) or section 380 of ITTOIA 2005 (the equivalent income tax rule).
• The purpose is to prevent the same amount being taxed twice — once when the bonds are issued and again when they are redeemed.
• "Funding bonds" is defined broadly to include any bonds, stocks, shares, securities or certificates of indebtedness.