Introduction Details of the Section
2.New subsection (2) inserts new section 162(1A) into the Corporation Tax Act 2010 (CTA 2010). New section 162(1A) ensures that loans forming part of a banks’ Tier Two capital are treated as ‘normal commercial loans’ for the purposes of the CT group relief rules. This change prevents a bank or a parent undertaking of a bank which issues Tier Two instruments from breaking its corporate group for CT purposes.
3.Subsection (3) inserts new section 164A into CTA 2010. New section 164A ensures instruments which form part of the bank’s or parent undertaking of a bank’s Tier Two capital resources are treated as though they are normal commercial loans and that this is not the case where a main purpose (or one of the main purposes) of a loan is obtaining a tax advantage.
4.New subsection (5) inserts new section 1032A into CTA 2010. New section 1032A(1) ensures that a payment made in respect of Tier Two securities is a not a distribution for tax purposes and that this is not the case where a main purpose (or one of the main purposes) of a payment is obtaining a tax advantage.