What are the material tax consequences of the Securities?
The material tax consequences of your investment in the Securities
are summarized below. The discussion below supplements the discussion
under "Certain U.S. Federal Income Tax Considerations" in the
accompanying prospectus supplement. Except as noted under "Non-U.S.
Holders" below, this section applies to you only if you are a U.S.
holder (as defined in the accompanying prospectus supplement) and you
hold your Securities as capital assets for tax purposes and does not
apply to you if you are a member of a class of holders subject to
special rules or are otherwise excluded from the discussion in the
prospectus supplement (for example, if you did not purchase your
Securities in the initial issuance of the Securities). In addition,
this discussion does not apply to you if you purchase your Securities
for less than the principal amount of the Securities.
The U.S. federal income tax consequences of your investment in the
Securities are uncertain and the Internal Revenue Service could
assert that the Securities should be taxed in a manner that is
different than described below. Pursuant to the terms of the
Securities, Barclays Bank PLC and you agree, in the absence of a
change in law or an administrative or judicial ruling to the
contrary, to characterize your Securities as a contingent
income-bearing derivative contract with respect to the applicable
underlying equity.
If your Securities are properly treated as a contingent
income-bearing derivative contract, it would be reasonable (i) to
treat any contingent coupon payments you receive on the Securities as
items of ordinary income taxable in accordance with your regular
method of accounting for U.S. federal income tax purposes and (ii) to
recognize gain or loss upon the sale, redemption or maturity of your
Securities in an amount equal to the difference (if any) between the
amount you receive at such time and your basis in the Securities for
U.S. federal income tax purposes. Except as described below, such
gain or loss should generally be long-term capital gain or loss if
you have held your Securities for more than one year. In addition, it
is possible that you should recognize ordinary income upon the sale
of your Securities to the extent of the portion of the sale proceeds
that relates to accrued contingent coupon payments that you have not
yet included in ordinary income. Any character mismatch arising from
your inclusion of ordinary income in respect of the contingent coupon
payments and capital loss (if any) upon the sale, redemption or
maturity of your Securities may result in adverse tax consequences to
you because an investor's ability to deduct capital losses is subject
to significant limitations.
In the opinion of our special tax counsel, Sullivan & Cromwell LLP,
it would be reasonable to treat your Securities in the manner
described above. This opinion assumes that the description of the
terms of the Securities in this pricing supplement is materially
correct.
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES
HOW YOUR SECURITIES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX
PURPOSES. AS A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF
YOUR INVESTMENT IN THE SECURITIES ARE UNCERTAIN. ACCORDINGLY, WE URGE
YOU TO CONSULT YOUR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF
INVESTING IN
THE SECURITIES.
Alternative Treatments.
As discussed further in the accompanying prospectus supplement, the
Treasury Department and the Internal Revenue Service are actively
considering various alternative treatments that may apply to
instruments such as the Securities, possibly with retroactive effect.
Other alternative treatments for your Securities may also be possible
under current law. For example, it is possible that the Securities
could be treated as a debt instrument that is subject to the special
tax rules governing contingent payment debt instruments. Under the
contingent payment debt instrument rules, you generally would be
required to accrue interest on a current basis in respect of the
Securities over their term based on the comparable yield and
projected payment schedule for the Securities and pay tax
accordingly, even though these amounts may exceed the contingent
coupon payments (if any) that are made on the Securities. You would
also be required to make adjustments to your accruals if the actual
amounts that you receive in any taxable year differ from the amounts
shown on the projected payment schedule. In addition, any gain you
may recognize on the sale, redemption or maturity of the Securities
would be taxed as ordinary interest income and any loss you may
recognize on the sale, redemption or maturity of the Securities would
generally be ordinary loss to the extent of the interest you
previously included as income without an offsetting negative
adjustment and thereafter would be capital loss. You should consult
your tax advisor as to the special rules that govern contingent
payment debt instruments.
It is also possible that your Securities could be treated as an
investment unit consisting of (i) a debt instrument that is issued to
you by us and (ii) a put option in respect of the applicable
underlying equity that is issued by you to us. You should consult
your tax advisor as to the possible consequences of this alternative
treatment.
You should consult your tax advisor with respect to these possible
alternative treatments.
For a further discussion of the tax treatment of your Securities and
the contingent coupon payments to be made on the securities as well
as other possible alternative characterizations, please see the
discussion under the heading "Certain U.S. Federal Income Tax
ConsiderationsCertain Notes Treated as Forward Contracts or
Derivative Contracts" in the accompanying prospectus supplement. You
should consult your tax advisor as to the possible alternative
treatments in respect of the Securities. For additional, important
considerations related to tax risks associated with investing in the
Securities, you should also examine the discussion in "Key
RisksTaxes", in this pricing supplement.
Non-U.S. Holders.
Barclays currently does not withhold on coupon payments to non-U.S.
holders in respect of instruments such as the Securities. However, if
Barclays determines that there is a material risk that it will be
required to withhold on any such payments, Barclays may withhold on
any contingent coupon payments at a 30% rate, unless you have
provided to Barclays (i) a valid Internal Revenue Service Form W-8ECI
or (ii) a valid Internal Revenue Service Form W-8BEN claiming tax
treaty benefits that reduce or eliminate withholding. If Barclays
elects to withhold and you have provided Barclays with a valid
Internal Revenue Service Form W-8BEN claiming tax treaty benefits
that reduce or eliminate withholding, Barclays may nevertheless
withhold up to 30% on any contingent coupon payments it makes to you
if there is any possible characterization of the payments that would
not be exempt from withholding under the treaty. Non-U.S. holders
will also be subject to the general rules regarding information
reporting and backup withholding as described under the heading
"Certain U.S. Federal Income Tax ConsiderationsInformation Reporting
and Backup Withholding" in the accompanying prospectus supplement.