Home Knowledge Revenue Guidance on the Tax Treatment of Additional Tier 1 Capital

Revenue Guidance on the Tax Treatment of Additional Tier 1 Capital

AT1 confirmed as Debt Instruments

Section 845C Taxes Consolidation Act 1997 (‘TCA 1997’) was introduced by the Finance Act 2015 and confirms that Additional Tier 1 Instruments (‘AT1’)1  issued by regulated financial institutions2 are to be regarded as debt instruments for tax purposes. The main consequences of which include:

  1. A coupon is regarded as interest and thus, may qualify for a tax deduction (where certain criteria are met);
  2. An exemption from interest withholding tax in respect of coupon payments.

Changes introduced by Finance Act 2019

The Finance Act 2019 included an amendment to Section 845C TCA 1997, confirming instruments which are equivalent to AT1 instruments, but which are issued by non-financial institutions, should have the same tax treatment as AT1 instruments. Revenue have issued a new Tax and Duty manual (here), with further details on the new equivalency treatment.

What is an AT1 Equivalent Instrument?

Due to the lack of published precedents and complexities associated with determining what an AT1 ‘equivalent’ instrument is, Revenue consider it prudent for taxpayers to either: 

  1. Seek a Revenue opinion regarding whether the tax treatment under section 845C TCA 1997 applies to their AT1 equivalent instrument in advance of any issuance; or
  2. Following the issue of the possible AT1-equivalent instruments, to include an Expression of Doubt when filing their corporation tax return. 

For further information, please contact us and we can discuss the changes in further detail. 

1 As prescribed in CRD IV
2 As defined in Article 4 of the CRR 


Contributed by Laura Ellen Ford