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

Hybrid payee deduction/non-inclusion mismatches and their extent

Section 259GB defines what constitutes a hybrid payee deduction/non-inclusion mismatch and how to measure its extent.

• A mismatch arises where the payer's tax deduction exceeds the total ordinary income recognised by the payees, and the excess is attributable to one or more payees being hybrid entities
• The mismatch amount equals only the portion of the excess caused by the hybrid nature of payees, excluding any excess attributable to qualifying institutional investors in certain circumstances
• Where a hybrid entity payee is not tax-resident anywhere and has no taxable permanent establishment, the rules deem a mismatch to arise based on the income that would have arisen if the payee were a UK company trading through a UK permanent establishment
• Amortisation deductions for intangible fixed assets under CTA 2009 sections 729 or 731 (or equivalent overseas provisions) are excluded from giving rise to a hybrid payee mismatch

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