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

Overview of Chapter

Section 259K provides an overview of Chapter 11, which deals with denying tax deductions where payments are connected with imported mismatch arrangements and the payer is within the charge to UK corporation tax.

• This chapter targets "imported mismatch arrangements" — structures where a hybrid mismatch that arises outside the UK is effectively shifted into the UK through a chain of payments, allowing a UK corporation tax deduction that would not otherwise be available.
• The chapter defines key terms including "imported mismatch payment", "imported mismatch arrangement", "dual territory double deduction", "excessive PE deduction" and "PE jurisdiction", and sets out the conditions that must be met before the rules apply.
• Where the conditions are met, some or all of the relevant UK tax deduction for the imported mismatch payment can be denied, although relief is available where an amount is deducted from dual inclusion income — that is, income taxed in more than one jurisdiction — and there is a cap on the total reduction that can be made.
• Special provision exists for cases that also fall within the transfer pricing rules in Part 4 of the Act, ensuring the two regimes interact properly.