The Taxation of Regulatory Capital Securities Regulations 2013

Regulatory capital securities treated as loan relationships

3.—(1) For the purposes of the Corporation Tax Acts, a regulatory capital security represents a loan relationship.

(2) But in relation to the issuer of a regulatory capital security and any connected creditor—

(a) sections 415, 416 and 585 of CTA 2009 (loan relationships with embedded derivatives) do not apply in relation to the security,

(b) the credits and debits to be brought into account in respect of the security are determined as if fair value accounting were not generally accepted accounting practice in relation to the security or part of the security (including a hedged component), and

(c) no credit or debit is to be brought into account under Part 5 of CTA 2009—

(i) in respect of the principal amount of the security being written down on a permanent or temporary basis or the security being converted to a Common Equity Tier 1 instrument in accordance with any regulatory requirements or the provisions governing the security, or

(ii) in respect of the principal amount of the security being written up, following a write down of the principal amount on a temporary basis, in accordance with any regulatory requirements or the provisions governing the security.

(3) Paragraph (2) applies for the purposes of determining the profits and losses to be recognised in determining the carrying value of a regulatory capital security for the purposes of section 317 of CTA 2009 as it applies for the purposes of determining the credits and debits to be brought into account under Part 5 of CTA 2009.

(4) In this regulation—

“Common Equity Tier 1 instrument” means a capital instrument which qualifies as a Common Equity Tier 1 instrument under Article 28 or 29 of CRR,

“connected creditor” means a company standing in the position of creditor as respects a regulatory capital security where the creditor relationship is a connected companies relationship for the purposes of Part 5 of CTA 2009,

“fair value accounting” have the same meanings as in Part 5 of CTA 2009.