Section 259DA | Circumstances in which the Chapter applies

(1)This Chapter applies if conditions A to E are met.

(2)Condition A is that there is a hybrid transfer arrangement in relation to an underlying instrument (see section 259DB).

(3)Condition B is that a payment or quasi-payment is made under or in connection with—

(a)the hybrid transfer arrangement, or

(b)the underlying instrument.

(4)Condition C is that—

(a)the payer is within the charge to corporation tax for the payment period, or

(b)a payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period.

(5)Condition D is that it is reasonable to suppose that, disregarding this Part and any equivalent provision under the law of a territory outside the United Kingdom, there would be a hybrid transfer deduction/non-inclusion mismatch in relation to the payment or quasi-payment (see section 259DC).

(6)Condition E is that—

(a)it is a quasi-payment that is made as mentioned in subsection (3) and the payer is also a payee (see section 259BB(7)),

(b)the payer and a payee are related (see section 259NC) at any time in the period—

(i)beginning with the day on which the hybrid transfer arrangement is made, and

(ii)ending with the last day of the payment period, or

(c)the hybrid transfer arrangement is a structured arrangement.

(7)The hybrid transfer arrangement is a “structured arrangement” if it is reasonable to suppose that—

(a)the hybrid transfer arrangement is designed to secure a hybrid transfer deduction/non-inclusion mismatch, or

(b)the terms of the hybrid transfer arrangement share the economic benefit of the mismatch between the parties to the arrangement or otherwise reflect the fact that the mismatch is expected to arise.

(8)The hybrid transfer arrangement may be designed to secure a hybrid transfer deduction/non-inclusion mismatch despite also being designed to secure any commercial or other objective.

(9)Sections 259DF (cases where the payer is within the charge to corporation tax for the payment period) and 259DG (cases where a payee is within the charge to corporation tax) make provision for the counteraction of the hybrid transfer deduction/non-inclusion mismatch.