Analysis: The Tax And The City Briefing For July


Redemption payments -

The Court of Appeal (CA) has made short work of a case where loan stock was issued without interest but with a right to redemption proceeds of 7.25% per annum on the principal amount. The outcome is not surprising given the drafting that was used, with the CA judge wondering why he had agreed to hear the case in the first place.

The CA found that the authors of the conditions of the notes had done just about all they could to point to the redemption proceeds as interest. It was paid by reference to an underlying debt, at a stipulated rate, by reference to time elapsed and accrued daily. the loan stock was not therefore a relevant discounted security (under the rules now in ITTOIA 2005 Part 4) and no loss arose to the taxpayer on its transfer (see Nicholas Pike v HMRC [2014] EWCA Civ 824, reported in Tax Journal, 27!June 2014).

Guidance in the HMRC manuals suggests that a premium on redemption is not interest. Although this was noted by the lower courts, it was not enough to overcome the clear language used in this case which permitted the CA to characterise the payment as interest.

Originally published on on 18 July 2014.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen & Overy LLP | Attorney Advertising

Written by:


Allen & Overy LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.