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

Counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction

Section 259JD restricts the use of dual territory double deductions where they arise because a company is a relevant multinational, the UK is the permanent establishment (PE) jurisdiction, and the parent jurisdiction has not applied its own equivalent anti-hybrid rules.

• A dual territory double deduction can only be set against dual inclusion income — that is, income taxed both in the UK and in an overseas jurisdiction — and any excess is carried forward to future periods
• If the company ceases to be a relevant multinational, any remaining unused "stranded deduction" can be relieved against the company's taxable total profits, with any further excess again carried forward
• If all or part of the double deduction is effectively used overseas against income that is not the company's dual inclusion income (an "illegitimate overseas deduction"), that amount is treated as already used, reducing what can be deducted in the UK
• Dual inclusion income includes income that falls within both UK corporation tax and an overseas tax charge for a permitted taxable period, which generally must begin within 12 months of the end of the relevant UK accounting period unless a claim is made and it is just and reasonable for the income to arise later

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