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 United States 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 executory contract with respect to the applicable
underlying equity.
If your Securities are properly treated as a contingent
income-bearing executory 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 capital 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 (other than amounts
attributable to a contingent coupon payment) and your basis in the
Securities for U.S. federal income tax purposes. Such gain or loss
should generally be long-term capital gain or loss if you have held
your Securities for more than one year. 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 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 free writing prospectus 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.
It is also possible that (i) you should not include the contingent
coupon payments (if any) in income as you receive them and instead
you should reduce your basis in your Securities by the amount of the
contingent coupon payments that you receive; (ii) you should not
include the contingent coupon payments (if any) in income as you
receive them and instead, upon the sale, redemption or maturity of
your Securities, you should recognize short-term capital gain or loss
in an amount equal to the difference between (a) the amount of the
contingent coupon payments made to you over the term of the
Securities (including the contingent coupon payment received at
redemption or maturity or the amount of cash that you receive upon a
sale that is attributable to the contingent coupon payments to be
made on the Securities) and (b) the excess (if any) of (1) the amount
you paid for your Securities over (2) the amount of cash you receive
upon sale, redemption or maturity (excluding the contingent coupon
payment received at redemption or maturity or the amount of cash that
you receive upon a sale that is attributable to the contingent coupon
payments to be made on the Securities); or (iii) if a contingent
coupon payment is made at redemption or maturity, such contingent
coupon payment should not separately be taken into account as
ordinary income but instead should increase the amount of capital
gain or decrease the amount of capital loss that you recognize at
such time.
You should consult your tax advisor with respect to these possible
alternative treatments.
For a further discussion of the tax treatment of your Securities as
well as other possible alternative characterizations, please see the
discussion under the heading "Certain U.S. Federal Income Tax
Considerations Certain Notes Treated as Forward Contracts or
Executory 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 Risks
Taxes", in this free writing prospectus.
"Specified Foreign Financial Asset" Reporting.
Under legislation enacted in 2010, owners of "specified foreign
financial assets" with an aggregate value in excess of $50,000 (and
in some circumstances, a higher threshold) may be required to file an
information report with respect to such assets with their tax
returns. "Specified foreign financial assets" generally include any
financial accounts maintained by foreign