Basel III: tax treatment of regulatory capital instruments
Published 15 June 2011
© Crown copyright 2011
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This publication is available at https://www.gov.uk/government/publications/basel-iii-tax-treatment-of-regulatory-capital-instruments/basel-iii-tax-treatment-of-regulatory-capital-instruments
The Basel Committee on Banking Supervision has proposed regulatory reforms focused on:
- enhancing the quality and quantity of bank capital
- addressing pro-cyclicality
- introducing a leverage ratio
- ensuring that banks are adequately capitalised against their counterparty credit risk
- liquidity management
The committee has proposed the creation of new capital instruments to support these reforms. A number of features of these instruments make their tax treatment uncertain under existing tax and accounting rules.
The Basel III provisions are expected to come into force following Capital Requirements Directive 4 (CRD 4) from 1 January 2013, so any changes to tax rules that the Government deems necessary will need to be made in Finance Bill 2012. In line with the government’s ‘New Approach to Policy-making’, notice to this effect was given in Budget 2011.
As part of this process the government has asked HM Revenue and Customs (HMRC) to identify specific tax issues arising from the Basel III proposals through an open informal discussion with industry with the aim of identifying any legislative changes to the tax rules that might be needed.
This page provides links to information published on the HMRC website. It will be updated regularly throughout the informal consultation process.
Basel III Working Group
In May 2011 HMRC issued a discussion document on the tax treatment of regulatory capital instruments.
The Basel III Working Group has been set up to complement wider consultation. They have announced a series of meetings to discuss aspects of the Basel III proposals and forthcoming European Union CRD 4.
Follow the links below to read the discussion document, a note on current tax treatment of new instruments designed to be CRD 4 compliant, and find the terms of reference and membership for this group. Minutes of their meetings will also be published along with any supporting documentation.
Discussion document on the tax treatment of regulatory capital instruments
Current tax treatment of new regulatory capital instruments
Find out more about the Basel III Working Group on the National Archive website
Draft legislation to clarify the Corporation Tax treatment of banks’ Tier 2 regulatory capital