TaxCorporate TaxDebt buy-backs hit by tax rule change

Debt buy-backs hit by tax rule change

Treasury targets tax on profits made by companies on debt buy-backs

The government has tightened tax rules around debt restructuring, in a move
that could be aimed at banks’ gains from the transactions.

Companies that buy back debt at a discount will have to recognise any profit
on the transaction immediately.

Deloitte
director Marcus Rea believes the number of debt buy-backs could fall drastically
as a result in the shift in policy, reported
the
FT
.

Banks and other major companies have bought back debt due to the price
available in a depressed market.
RBS bought
back £14.8bn of debt in March, which resulted in a pre-tax gain of £4.6bn.

One lawyer said: “The banks are in their sights.”

The Treasury
said the change in policy would only affect companies being rescued, and the
transaction was being undertaken where there was no commercial justification, in
order to avoid tax.

Further reading:

83,000 scam emails reported to HMRC
in September

Uncertainty surrounds windfall tax
for banks

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