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. Because the term of your Securities will
not exceed one year, such gain or loss should generally be short-term
capital gain or loss. Short-term capital gains are generally subject
to tax at the marginal tax rates applicable to 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 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 contingent short-term debt obligation. However,
no specific rules govern contingent short-term debt obligations, and
accordingly you should consult your tax advisor regarding this
alternative characterization of the Securities. For a further
discussion of some of the tax considerations applicable to short-term
debt obligations, please see the discussion under the heading
"Certain U.S. Federal Income Tax Considerations U.S. Federal Income
Tax Treatment of the Notes as Indebtedness for U.S. Federal Income
Tax Purposes Short-Term Obligations" in the accompanying prospectus
supplement.
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.
In addition, it is 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 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 contingent coupon payment); 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.
It is also possible that any loss you would recognize upon the
maturity of the Securities would be long-term capital loss as opposed
to short-term capital loss should a Market Disruption Event occur.
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.
Medicare Tax
. As discussed under "Certain U.S. Federal Income Tax
ConsiderationsMedicare Tax" in the accompanying prospectus
supplement, certain U.S. holders will be subject to a 3.8% Medicare
tax on their "net investment income" if their modified adjusted gross
income for the taxable year is over a certain threshold. Net
investment income will include any gain that a U.S. holder recognizes
upon the sale, redemption or maturity of the Securities, unless such
income is derived in the ordinary course of the conduct of a trade or
business (other than a trade or business that consists of certain
passive or trading activities). It is not clear, however, whether the
Medicare tax would apply to any contingent coupon payments that you
receive on the Securities, unless such contingent coupon payments are
derived