Corporation Tax Act 2009 section 420A

Amounts payable in respect of hybrid capital instruments

Section 420A ensures that qualifying amounts payable under hybrid capital instruments are not treated as distributions for corporation tax purposes, thereby preserving their deductibility as interest-like payments.

• Where a loan relationship is a hybrid capital instrument for an accounting period, qualifying amounts payable under it are not treated as distributions for corporation tax purposes.
• A qualifying amount is one that would not be regarded as a distribution if the instrument's provisions allowing the debtor to defer or cancel interest payments were disregarded.
• This treatment applies to any person in respect of times falling within the relevant accounting period of the debtor company.
• Hybrid capital instruments are also prevented from being classified as "special securities" (specifically equity notes) under section 1015(1A) of CTA 2010.