F1PART 6AHybrid and other mismatches
CHAPTER 3Hybrid and other mismatches from financial instruments
Counteraction
259CDCounteraction where the payer is within the charge to corporation tax for the payment period
1
This section applies where the payer is within the charge to corporation tax for the payment period.
2
For corporation tax purposes, the relevant deduction that may be deducted from the payer's income for the payment period is reduced by an amount equal to the hybrid or otherwise impermissible deduction/non-inclusion mismatch mentioned in section 259CA(4).
259CECounteraction where a payee is within the charge to corporation tax
1
This section applies in relation to a payee where—
a
the payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, and
b
it is reasonable to suppose that—
i
neither section 259CD nor any equivalent provision under the law of a territory outside the United Kingdom applies, or
ii
a provision of the law of a territory outside the United Kingdom that is equivalent to section 259CD applies, but does not fully counteract the hybrid or otherwise impermissible deduction/non-inclusion mismatch mentioned in section 259CA(4).
2
A provision of the law of a territory outside the United Kingdom that is equivalent to section 259CD does not fully counteract that mismatch if (and only if)—
a
it does not reduce the relevant deduction by the full amount of the mismatch, and
b
the payer is still able to deduct some of the relevant deduction from income in calculating taxable profits.
3
In this section “the relevant amount” is—
a
in a case where subsection (1)(b)(i) applies, an amount equal to the hybrid or otherwise impermissible deduction/non-inclusion mismatch mentioned in section 259CA(4), or
b
in a case where subsection (1)(b)(ii) applies, the lesser of—
i
the amount by which that mismatch exceeds the amount by which it is reasonable to suppose the relevant deduction is reduced by a provision under the law of a territory outside the United Kingdom that is equivalent to section 259CD, and
ii
the amount of the relevant deduction that may still be deducted as mentioned in subsection (2)(b).
4
If the payee is the only payee, the relevant amount is to be treated as income arising to the payee for the counteraction period.
5
If there is more than one payee, an amount equal to the payee's share of the relevant amount is to be treated as income arising to the payee for the counteraction period.
6
The payee's share of the relevant amount is to be determined by apportioning that amount between all the payees on a just and reasonable basis, having regard (in particular)—
a
to any arrangements as to profit sharing that may exist between some or all of the payees,
b
to whom any under-taxed amounts (within the meaning given by section 259CB(7)) arise, and
c
to whom any amounts of ordinary income that it would be reasonable to expect to arise as a result of the payment or quasi-payment, but that do not arise, would have arisen.
7
An amount of income that is treated as arising under subsection (4) or (5) is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(2) of that Act).
8
The “counteraction period” means—
a
if an accounting period of the payee coincides with the payment period, that accounting period, or
b
otherwise, the first accounting period of the payee that is wholly or partly within the payment period.
Pt. 6A inserted (with effect in accordance with Sch. 10 paras. 18-21 of the amending Act) by Finance Act 2016 (c. 24), Sch. 10 para. 1