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HMRC internal manual

Corporate Finance Manual

Loan relationships: special types of security: funding bonds: dividing a funding bond after Finance Act 2008

Where there is no appropriate combination of funding bonds to make the repayment claim

If the funding bond is issued on or after 12 March 2008 then new ITA07/S940A will apply to that funding bond. This section applies if the funding bond used to pay the tax deducted and held by HMRC is not suitable for satisfying the repayment claim. For example, the funding bond may be a single bond with a face value of £50,000 whereas the repayment claim is for funding bonds with a face value of £10,000.

S940A enables HMRC to request that the bond issuer secures that HMRC holds the combination of bonds to enable HMRC to satisfy the repayment claim. In the example used above, the issuing company would be asked to divide the funding bond into two, one part to be kept by HMRC (£40,000) and the other part (£10,000) used by HMRC to satisfy the repayment claim. The bond issuer itself may request the assistance of another person or persons to comply with the HMRC request. The bond issuer or other person from whom assistance is requested does not have to comply with the request from HMRC if it would be impracticable to do so. The meaning of ‘impracticable’ is discussed at CFM37430.

Requests under ITA07/S940A are made by the Funding Bond Section and if you become aware that such a request is necessary please contact the Funding Bond Section as advised in CFM37490 above.

When considering whether or not to make a request to divide the funding bond, the following factors may be taken into account:

  • the value of the funding bond at its time of issue;
  • the interest that the relevant creditor, or any other person has in the funding bond; and
  • the terms on which the funding bond is issued.