Taxation (International and Other Provisions) Act 2010 section 259CE

Counteraction where a payee is within the charge to corporation tax

Section 259CE provides the secondary counteraction for hybrid mismatch arrangements involving financial instruments, requiring a payee within the charge to UK corporation tax to bring an amount into income where the payer's deduction has not been fully counteracted under the primary response rules.

• Where a payer's deduction has not been denied or reduced (either under section 259CD or equivalent foreign rules), the payee must recognise additional taxable income equal to the uncountered mismatch amount
• If a foreign equivalent of section 259CD only partially counteracts the mismatch, the payee's income inclusion is limited to the lesser of the remaining mismatch and the amount the payer can still deduct
• Where there are multiple payees, the total amount to be brought into income is apportioned between them on a just and reasonable basis, considering profit-sharing arrangements and where under-taxed or missing income amounts arise
• The additional income is charged to corporation tax as "income not otherwise charged" under CTA 2009, and arises in the payee's accounting period that coincides with or first falls within the payment period