CTM35218 - Income Tax: Deduction of tax: Eurobonds and deduction of tax

Application of the Eurobond exemption

This guidance originally appeared as a Revenue and Customs Brief published on 7 April 2008 and has since been updated.

There is an obligation on a company to deduct tax under ITA07/S874 on yearly interest but ITA07/S882 removes the obligation to deduct tax in respect of a quoted Eurobond. This is defined in ITA07/S987 (see also CFM11070).

A quoted Eurobond is a security issued by a company which carries a right to interest and is either:

• Listed on a recognised stock exchange; or
• Admitted to trading on a multilateral trading facility operated by a regulated recognised stock exchange.

In this context, a “recognised stock exchange”, is defined in ITA07/S1005. Wherever the exchange is established, the essential requirement is that it is designated as such by the Commissioners for HMRC.

A “regulated recognised stock exchange” is a recognised stock exchange that is regulated in the UK, the European Economic Area, or Gibraltar.

The definition of a “multilateral trading facility” is derived from EU Regulation 600/2014, as set out in ITA07/S987(2)(b).

These qualifications must be satisfied at the date of payment of the interest.

Companies considering applying for a listing or currently undertaking the application process should, before making the first payment of interest on the Eurobond, ensure that the Eurobond is listed or admitted to trading. Applying for a listing is not sufficient. For tables of recognised stock exchanges, follow this link.

Companies relying on the Eurobond exemption must ensure the requirements for exemption are met before paying interest on the Eurobond.