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

Counteraction where the investor is within the charge to corporation tax

Section 259GD sets out how a hybrid payee mismatch is counteracted by treating an amount as taxable income of the investor, where the investor is within the charge to UK corporation tax and the payer-side counteraction under section 259GC (or its overseas equivalent) has not fully addressed the mismatch.

• Where neither the UK payer-side rule (section 259GC) nor any overseas equivalent has fully counteracted the hybrid payee deduction/non-inclusion mismatch, an amount (the "relevant amount") is treated as taxable income of the investor
• The relevant amount equals the full mismatch if no counteraction has been applied at all, or equals the lesser of the remaining uncountered mismatch and the deduction the payer can still claim, if partial counteraction has occurred overseas
• Where there are multiple hybrid payees or multiple investors, the relevant amount is apportioned on a just and reasonable basis, taking into account profit-sharing arrangements and the extent to which each hybrid payee contributes to the mismatch
• The deemed income is charged to corporation tax under the residual income charge in Chapter 8 of Part 10 of CTA 2009, and arises in the investor's accounting period that coincides with or first falls within the payment period

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