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HMRC internal manual

Company Taxation Manual

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

Application of the Eurobond exemption

This guidance first appeared as a Revenue and Customs Brief published on 7 April 2008.

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 as an interest-bearing security that is issued by a company and is listed on a recognised stock exchange. The meaning of listed on a recognised stock exchange is given by ITA07/S1005 and requires that the securities are admitted to trading on that exchange and are included in the official list.

These qualifications must be satisfied at the date of payment of the interest. Where a Eurobond is included in the official UK list or is officially listed overseas on an exchange that has been designated by HMRC as a recognised stock exchange that Eurobond will be regarded as meeting the qualifications.

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 and admitted to trading. Applying for a listing is not sufficient. A list of recognised stock exchanges is published on the HMRC website.

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