Funding Bonds: when HMRC will satisfy a repayment claim using funding bonds
Making repayments in funding bonds
HMRC can satisfy a repayment claim using funding bonds where the funding bond was issued before 12 March 2008 and the claimant has agreed to accept the funding bond in satisfaction of the repayment claim.
Otherwise for funding bonds issued on or after 12 March 2008:
- The funding bonds used to satisfy the repayment must have been tendered to HMRC in respect of tax deducted from interest paid by funding bond; and
- The relevant creditor making the repayment claim is the creditor within ITA07/S939 from whose interest the issuing company was required to deduct tax.
This ensures that the funding bond used to pay the tax deducted is connected with the repayment claim.
The value of the funding bond for tax purposes is the same value that it had as at the time of issue and it is this value that is relevant for the repayment claim. In practice this will not make a difference to the proportion of funding bonds used to satisfy the repayment claim but it will be relevant if the repayment claim cannot be satisfied by funding bonds (see CFM37470) and for accurate completion of the issuing company’s CT61 return.
In order to satisfy the repayment claim any restrictions on the tender or transfer of the funding bonds are ignored to enable HMRC to tender the funding bonds in satisfaction of the repayment claim and transfer the funding bonds to the claimant as necessary (ITA07/s939(4C)).