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

Counteraction where a hybrid payee is an LLP

Section 259GE deals with the counteraction of hybrid mismatch outcomes where the hybrid payee is a limited liability partnership (LLP), ensuring that any remaining deduction/non-inclusion mismatch is addressed by treating an appropriate amount as taxable income of the LLP itself.

• Where a payment to a hybrid payee LLP gives rise to a deduction/non-inclusion mismatch that has not been fully counteracted by prior provisions (either UK or equivalent overseas rules), this section imposes a further counteraction on the LLP.
• The "relevant amount" — equal to the full mismatch if no other counteraction applies, or equal to the remaining uncountered portion if partial counteraction has occurred — is treated as income arising to the LLP on the last day of the payment period.
• Where there are multiple hybrid payees, the relevant amount is apportioned between them on a just and reasonable basis, taking into account profit-sharing arrangements and the extent to which each payee's hybrid status contributes to the mismatch.
• The deemed income is charged to corporation tax on the LLP itself (not on its individual members), and the normal rules that treat LLPs as transparent for tax purposes are disapplied to the extent necessary to make this charge effective.