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

Claims for allocation of DII surplus

Section 259ZMB sets out the conditions under which a group company with a dual inclusion income shortfall can claim an allocation of another group company's dual inclusion income surplus, and explains the consequences of such a claim.

• Company B can claim all or part of Company A's unused dual inclusion income (DII) surplus for an overlapping period, provided five requirements are satisfied — including that Company A consents, the claim specifies the surplus amount, and Company B has sufficient non-dual-inclusion ordinary income ("matchable income") at least equal to the claimed amount.
• The matchable income identified in the claim must exactly equal the DII surplus being claimed, and must not exceed the unused part of Company B's own DII shortfall for the relevant period.
• When a valid claim is made, Company A's dual inclusion income for the surplus period is reduced by the amount of matchable income covered by the claim.
• The matchable income is then treated as if things done by or to Company A in relation to that amount had been done by or to Company B, while all other factual circumstances remain unchanged — effectively transferring the character of the income from Company A to Company B for hybrid mismatch purposes.