Home      Login

Abstract: 

Long popular as an effective and economical means of raising capital for banking, insurance, and other regulated undertakings, “hybrid” debt instruments are once again topical in the UK, with emerging evidence of their attractiveness to non-regulated commercial businesses, against the background of pressure on issuers to minimize the effect of issuing debt on their credit ratings and upheavals caused by the introduction of International Accounting Standards in the UK. This article looks at the UK tax rules on hybrid instruments, from the perspective of a tax advisor to a UK resident issuer, examining the UK tax goals towards which the advisor must strive to ensure the issue achieves the most efficient tax result for the client. The article also examines the new and, in some respects, still controversial and evolving rules about the division of convertible and exchangeable instruments into “straight debt” and “equity” or “derivative” components.

Keywords: 

Affiliations:  1: Herbert Smith LLP; 2: Herbert Smith LLP; 3: Herbert Smith LLP.