Euro-risk bonds

The taxpayer was a member of Tonnant LLP which bought bonds on the secondary market at what it believed to be an undervalue with the aim of keeping them until they matured or could be sold at a profit.

Six bonds were later realised in sterling. Interest was payable in sterling but the bonds had been issued with a provision that they could be converted into euros if the UK adopted the EU currency.

HMRC considered the bonds were not qualifying corporate bonds because their terms allowed for their conversion or redemption in a currency other than sterling (TCGA 1992 s 117). The taxpayer appealed.

The First-tier Tribunal said the effect of s 117(2)(b) was that the provision did not prevent the bonds being qualifying corporate bonds. They were issued in sterling and they qualified for the exemption even if they were redeemed in another currency...