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The new regime for hybrid capital instruments

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A new non-sector specific hybrid capital instrument (HCI) regime will apply in place of the regulatory capital securities regime from 1 January 2019. The new HCI regime represents a move away from the ‘blanket fix’ approach under the Taxation of Regulatory Capital Securities Regulations SI 2013/3209 (‘the RCS regulations’). It does not simply provide for payments on a HCI not to be distributions. Rather the legislation focuses on making the minimum changes necessary. The new regime should be welcomed for showing the UK’s continuing to commit to a policy of allowing tax deductible regulatory capital but it will mean more work for tax advisers. Without a regulatory capital treatment gateway condition advisers will need to go back to the pre-RCS regulations approach of assessing all terms and conditions of each instrument to check that each meets the definition of HCI; and advisers should be...

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