Treatment of Additional Tier 1 Capital

Revenue has updated the Tax and Duty Manual which provides guidance on determining which instruments can be treated as equivalent to an Additional Tier 1 instrument.

Under the CRD IV (Capital Requirements Directive and Capital Requirements Regulation) Tier 1 capital, the primary funding of a bank, is made up of two components, one of which is Additional Tier 1 (‘AT1’) capital. The CRD IV sets out the features that an AT1 capital instrument must possess. Section 845C TCA 1997 provides clarity on the tax treatment of AT1 capital instruments and other substantially similar or ‘equivalent’ instruments. This manual explains the implications of section 845C in relation to certain capital instruments.