CFM17032 – Funding bonds: issue

Funding bonds issued to cover an interest liability

Where funding bonds including any

• bonds,
• stocks,
• shares,
• securities or
• certificates of indebtedness

are issued to a creditor in respect of any liability to pay interest on any debt incurred by any

• Government,
• public authority,
• public institution or
• body corporate

ICTA88/S582 treats the issue as if it were a payment of interest for corporation tax purposes. ITTOIA05/S380 achieves the same effect for income tax purposes. However the amount treated as paid cannot exceed the value of the bonds at the time of their issue. “Value” here means the value of the funding bond at issue – see CFM17038.

It is the issue of the bond itself which counts as the “payment” of interest, and not its later redemption for cash.