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

Application of Chapter 9

Section 259MC provides a de minimis exclusion from the hybrid entity double deduction mismatch rules in Chapter 9 where an investor holds its interest through a transparent fund and that interest accounts for less than 10% of the potential double deduction amount.

• Where Chapter 9 applies to a hybrid entity double deduction amount but the investor holds its interest through a transparent fund, a special rule may limit the scope of the mismatch adjustment.
• If it is reasonable to suppose that the portion of the double deduction amount attributable to the investor's interest in the transparent fund is less than 10% of the potential double deduction amount, that portion is ignored when calculating the mismatch.
• The potential double deduction amount is the hybrid double deduction amount that would arise if the transparent fund itself were treated as the investor in the hybrid entity.
• Where two or more investors in the same transparent fund are connected persons, their interests must be aggregated — so if their combined share is 10% or more of the potential double deduction amount, the de minimis exclusion does not apply.