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

Counteraction where a payee is within the charge to corporation tax

Section 259ED provides the secondary counteraction for hybrid payer deduction/non-inclusion mismatches, applying where the payee (the party receiving the payment) is within the charge to UK corporation tax and the primary counteraction (which restricts the payer's deduction) has not been applied or has not fully resolved the mismatch.

• This section applies when a payee is within the charge to UK corporation tax and no equivalent foreign law counteraction has been applied to the hybrid payer, or any such foreign counteraction has only partially addressed the mismatch.
• The "relevant amount" — being the full mismatch where no foreign counteraction applies, or the remaining unresolved portion where a foreign counteraction only partly applies — is treated as taxable income of the payee (reduced by any dual inclusion income of the hybrid payer).
• Where there are multiple payees, the relevant amount is apportioned between them on a just and reasonable basis, taking into account profit-sharing arrangements and the identity of those to whom the income would ordinarily have arisen.
• The income treated as arising to the payee is charged to corporation tax under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged), and is allocated to the counteraction period — either the accounting period coinciding with the payment period or, failing that, the first accounting period falling wholly or partly within the payment period.

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