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New tax regime for regulatory capital in the UK


01 October 2013

The UK tax authority (HMRC) is consulting on a new tax regime for regulatory capital issued in line with the Capital Requirements Regulation (CRR) element of the Capital Requirements Directive IV package of regulatory reform.

The new tax regime will apply to Additional Tier 1 instruments and Tier 2 instruments issued by qualifying issuers in compliance with CRR. Credit institutions and investment firms (both as defined in the CRR) will benefit from the new treatment. The package includes favourable tax rules regarding the deductibility of coupons and the write-down or conversion of regulatory capital. Draft regulations have been issued and final regulations are due to be finalised this autumn, before enactment by the end of 2013. We intend to cover the final regulations in the December 2013 edition of the Risk Note.

As we are actively involved with the consultation, please let us know if you have any queries on the scope of the regulations. Alternatively, you may be interested in our alert published following the release of the draft regulations: Tax deduction for regulatory capital – the regulations have landed.8 


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