Structured Finance 

On 27 March 2012 HMRC published a consultation document on possible changes to the exemption from the requirement to deduct tax from quoted Eurobonds - The Quoted Eurobond Exemption.  The consultation was aimed at seeking views on:

  • restricting the Quoted Eurobond Exemption where notes or bonds were held on an intra-group basis; and
  • the introduction of a requirement to pay tax on non-cash (or PIK) interest to HMRC in cash, instead of by the issuance of funding bonds.

Responses and proposals

Over 70 responses to the consultation were received in relation to the Quoted Eurobond Exemption, interest-in-kind and funding bonds from a range of businesses, professional services firms, trade and industry bodies and individuals.

A summary of the response issued by HMRC last Tuesday together with the various proposals which are to be included in the Finance Bill 2013 (UK), to be published later this year, can be found at the following link:


The impact of the responses is such that the UK government:

  • has dropped and does not intended to proceed with the restriction of the Quoted Eurobond Exemption, as proposed in the consultation document;
  • will propose legislation in the Finance Bill 2013 to clarify the value of interest-in-kind, distinguish interest-in-kind and funding bonds and require persons paying interest-in-kind and funding bonds to certify the value of PIK notes or funding bonds issued.


Whilst we expect that quoted Eurobond issuers will want to discuss the impact of the proposals (if any) on (a) Eurobonds or notes which they have listed on the CISX or elsewhere and (b) Eurobonds or notes which they intend listing, it is positive that HMRC has issued firm guidance about the UK government's intentions about preserving the Quoted Eurobond Exemption.

Since the consultation was announced, Ogier Corporate Finance Limited has continued to field a number of enquiries from UK issuers seeking to list intra-group debt on the CISX to qualify for the Quote Eurobond Exemption.

We believe that the guidance issued by HMRC will enable issuer groups to work with their tax and other advisers to discuss, with certainty and confidence, their future plans as regards:

  • corporate group financing requirements;
  • acquisition funding arrangements; and
  • the issuance of debt securities to third party lenders, where bilateral borrowing may not be available.

The proposal to leave the Quoted Eurobond Exemption as it is, will hopefully contribute positively to the maintenance of liquidity levels by UK corporates.  It is widely recognised in the market that such liquidity is one of the ingredients necessary to stimulate M&A and other economic activity in the UK and European markets.