Finance Act 2013

43 Tier two capital U.K.

(1) CTA 2010 is amended as follows.

(2) In section 162 (meaning of “normal commercial loan”), after subsection (1) insert—

“(1A) For those purposes, “normal commercial loan” also includes any loan which is not a normal commercial loan by virtue of subsection (1) but is such a loan by virtue of section 164A(1) (loan forming part of tier two capital).”

(3) After section 164 insert—

“164A Loan forming part of tier two capital

(1) A loan is a normal commercial loan by virtue of this subsection if it—

(a) was made to a bank or a parent undertaking of a bank, and

(b) forms part of the tier two capital resources of the bank or parent undertaking.

(2) Subsection (1) does not apply in the case of any loan if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of that loan.

(3) For the purposes of this section—

(a) “bank” has the meaning given by section 1120,

(b) “tax advantage” has the meaning given by section 1139,

(c) “parent undertaking” is to be read in accordance with section 420 of FISMA 2000, and

(d) the reference to tier two capital resources is to be read in accordance with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

(4) In relation to any time before 1 April 2013, the reference in subsection (3)(d) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).”

(4) In section 1029(1) (overview), after paragraph (c) insert—

“(ca) section 1032A (payment in respect of tier two capital),”.

(5) After section 1032 insert—

“Tier two capital U.K.

1032A Payment in respect of tier two capital

(1) A payment made in respect of tier two securities is not a distribution for the purposes of the Corporation Tax Acts.

(2) Subsection (1) does not apply in the case of any tier two securities if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of those securities.

(3) For the purposes of this section—

(a) “tier two securities” means securities (other than shares) issued by a bank or a parent undertaking of a bank that form part of the tier two capital resources of the bank or parent undertaking,

(b) “bank” has the meaning given by section 1120,

(c) “tax advantage” has the meaning given by section 1139,

(d) “parent undertaking” is to be read in accordance with section 420 of FISMA 2000, and

(e) the reference to tier two capital resources is to be read in accordance with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

(4) In relation to any time before 1 April 2013, the reference in subsection (3)(e) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).”

(6) The amendments made by this section are treated as having come into force on 26 October 2012.