Part 15

Deduction of income tax at source
Chapter 12

Funding bonds

Duty to retain bonds where issue treated as payment of interest
939
1
This section applies if—
a
there is an issue of funding bonds to a creditor in respect of a liability to pay interest on a debt incurred by a government, public institution, other public authority or body corporate,
b
by virtue of section 413 of CTA 2009 or section 380 of ITTOIA 2005, the issue is treated as if it were a payment of an amount of interest (“the deemed interest”), and
c
the person by or through whom the bonds are issued is required, under this Part, to deduct a sum representing income tax from the deemed interest.
2
The person by or through whom the bonds are issued must retain bonds the value of which is, at the time of their issue, equal to income tax on the deemed interest at the basic rate in force for the tax year in which the bonds are issued.
3
A person who retains bonds in accordance with subsection (2) is treated as complying with the duty to deduct a sum representing income tax from the deemed interest.
4
The person may tender the bonds retained in satisfaction of any income tax to be collected from the person in respect of the deemed interest under Chapter 15 or 16.
4A
If bonds are tendered in accordance with subsection (4), the Commissioners for Her Majesty's Revenue and Customs may tender the bonds in satisfaction of any amount that is payable by the Commissioners to the relevant creditor in connection with the relevant debt.
4B
For the purposes of subsection (4A)—
a
“
relevant creditor
” and “
relevant debt
” mean the creditor and the debt mentioned in subsection (1)(a), and
b
a bond is to be taken to have the same value that it had at the time of its issue.
4C
If bonds that are to be tendered in accordance with subsection (4) or (4A) are subject to restrictions on their tender or transfer, the restrictions do not prevent the bonds from being—
a
tendered in accordance with that subsection, or
b
transferred from the person tendering them to the person to whom they are tendered.
5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
In this Chapter “funding bonds” includes any bonds, stocks, shares, securities or certificates of indebtedness (but does not include any instrument providing for payment in the form of goods or services or a voucher).
Words in s. 939(1)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 712 (with Sch. 2 Pts. 1, 2)
Words in s. 939(2) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 32
S. 939(5) omitted (21.7.2008 with effect in accordance with s. 134(5) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 134(3)
Words in s. 939(6) inserted (with effect in accordance with Sch. 11 para. 12(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 11 para. 8
Pt. 15 modified (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 551(4), 1329(1) (with Pts. 1, 2, Sch. 2 para. 78)
S. 939(4A)-(4C) inserted (21.7.2008 with effect in accordance with s. 134(5) of the amending Act) by Finance Act 2008 (c. 9), s. 134(2)