Finance Act 2022

26 Amendments of section 259GB of TIOPA 2010

(1) Section 259GB of TIOPA 2010 (hybrid payee deduction/non-inclusion mismatches and their extent) is amended as follows.

(2) In subsection (4A)—

(a) in the words before paragraph (a), after “partnership” insert “or a relevant transparent entity”;

(b) in paragraph (a), after “partnership” insert “, or a member of the entity,”;

(c) in paragraph (b)—

(i) in sub-paragraph (i), after “partnership” insert “or entity”;

(ii) in sub-paragraph (ii), after “partner”, in each place it occurs, insert “or member”.

(3) After that subsection insert—

“(4AA) Subsection (4AB) applies in relation to a payment or quasi-payment if—

(a) one or more of the payees is a partnership or a relevant transparent entity,

(b) there is a territory under the law of which an amount of ordinary income would arise, or would potentially arise, to a hybrid entity as a result of the circumstances giving rise to the relevant deduction if the entity were a person resident in that territory for the purposes of a tax charged under the law of that territory, and

(c) that hybrid entity is not (ignoring subsection (4AB)(b)) a payee.

(4AB) Where this subsection applies—

(a) if any such hybrid entity is not either a partnership or a relevant transparent entity, subsection (4A) does not apply, or

(b) otherwise, every such hybrid entity is to be treated as a payee for the purposes of determining, for the purposes of subsection (1)(b), if an excess arises by reason of one or more payees being hybrid entities.”

(4) In subsection (4B), for “subsection (4A)” substitute “subsections (4A) to (4AB) and (4C)”.

(5) After that subsection insert—

“(4C) An entity is a “relevant transparent entity” if—

(a) the entity is not a partnership,

(b) the entity is legally constituted in a territory outside the United Kingdom,

(c) all of the entity’s income or profits for the purposes of a tax charged under the law of that territory are treated (or would be if there were any) for the purposes of that tax as the income or profits of its members, and

(d) any such tax that is, or that would be, charged on such a member that is resident for tax purposes in that territory is not charged at a nil rate.

(4D) For the purposes of subsection (4C), a person is a “member” of an entity if the person is entitled to a proportion of the profits of the entity as a result of—

(a) where the entity has share capital, holding shares forming part of that capital, or

(b) where the entity does not have share capital, an entitlement similar to that which would be enjoyed if the entity had share capital and the person held shares forming part of that capital.”

(6) Section 259GB of TIOPA 2010 has effect, and is to be deemed always to have had effect, with the amendments made by this section.

(7) But that section has effect —

(a) in relation to payments made before the day on which this Act is passed, or

(b) in relation to quasi-payments in relation to which the payment period had begun before that date,

with the modifications set out in subsection (8).

(8) Those modifications are that subsections (4AA) and (4AB) of TIOPA 2010 (as inserted by subsection (3)) have effect as if—

(a) any reference in those subsections to a hybrid entity did not include a partnership (within the meaning given by section 259NE(4) of TIOPA 2010),

(b) in paragraph (a) of subsection (4AA), “a partnership or” were omitted, and

(c) in paragraph (a) of subsection (4AB)—

(i) “either a partnership or” were omitted, and

(ii) after “apply” there were inserted “in relation to any payee that is a relevant transparent entity”.

(9) A taxpayer may, in consequence of the amendments made by this section, make reasonable adjustments to claims, returns and elections made before the day on which this Act is passed.

(10) Any such adjustments must be made on or before 31 December 2022 but, subject to that, the time limits otherwise applicable to amending or withdrawing the claim, return or election in question do not prevent an adjustment being made under subsection (9).