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

Multinational payee deduction/non-inclusion mismatches and their extent

Section 259HB defines what a "multinational payee deduction/non-inclusion mismatch" is, how to measure its extent, and the time limits within which income must be recognised by the payee.

• A mismatch arises where the payer's tax deduction for a payment exceeds the total ordinary income recognised by all payees, and that excess is attributable (in whole or part) to one or more payees being multinational companies with permanent establishments in different jurisdictions.
• The mismatch does not apply to the extent the deduction relates to amortisation of intangible fixed assets under UK rules (CTA 2009 sections 729 or 731) or equivalent foreign provisions.
• The size of the mismatch equals the portion of the excess that arises because one or more payees are multinational companies — but any excess caused solely by a PE jurisdiction having no corporate tax regime at all is excluded from this calculation.
• Income must be recognised in a "permitted" taxable period, meaning one that begins within 12 months after the end of the payment period, unless a later period is claimed and it is just and reasonable for the income to arise in that later period.