Corporation Tax Act 2010 section 1032A

Payment in respect of tier two capital

Section 1032A provides that payments made on tier two capital securities issued by banks and other regulated entities are not treated as distributions for corporation tax purposes, subject to an anti-avoidance rule.

• Payments made in respect of tier two securities are not treated as distributions for tax purposes, meaning they can generally be deducted as an expense rather than being treated as a non-deductible return on equity.
• This treatment does not apply where a main purpose, or one of the main purposes, of making the payment is to obtain a tax advantage — an anti-avoidance safeguard.
• Tier two securities are instruments that form part of a bank's or other regulated entity's tier two capital under the relevant regulatory framework.
• The section also defines "parent undertaking" for the purposes of identifying the relevant group relationships when determining whether an instrument qualifies.