Section 259GD | Counteraction where the investor is within the charge to corporation tax ^F1

(1)This section applies in relation to an investor in a hybrid payee where—

(a)the investor is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, and

(b)it is reasonable to suppose that—

(i)neither section 259GC nor any equivalent provision under the law of a territory outside the United Kingdom applies, or

(ii)a provision of the law of a territory outside the United Kingdom that is equivalent to section 259GC applies, but does not fully counteract the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5).

(2)A provision of the law of a territory outside the United Kingdom that is equivalent to section 259GC does not fully counteract that mismatch if (and only if)—

(a)it does not reduce the relevant deduction by the full amount of the mismatch, and

(b)the payer is still able to deduct some of the relevant deduction from income in calculating taxable profits.

(3)In this section “the relevant amount” is—

(a)in a case where subsection (1)(b)(i) applies, an amount equal to the hybrid payee deduction/non-inclusion mismatch, or

(b)in a case where subsection (1)(b)(ii) applies, the lesser of—

(i)the amount by which that mismatch exceeds the amount by which it is reasonable to suppose the relevant deduction is reduced by a provision of the law of a territory outside the United Kingdom that is equivalent to section 259GC, and

(ii)the amount of the relevant deduction that may still be deducted as mentioned in subsection (2)(b).

(4)If the investor is the only investor in the hybrid payee, the appropriate proportion of the relevant amount is to be treated as income arising to the investor for the counteraction period.

(5)If there is more than one investor in the hybrid payee, an amount equal to the investor's share of the appropriate proportion of the relevant amount is to be treated as income arising to the investor for the counteraction period.

(6)For the purposes of subsections (4) and (5) the “appropriate proportion of the relevant amount”—

(a)if the hybrid payee is the only hybrid payee, is all of the relevant amount, or

(b)if there is more than one hybrid payee, is the proportion of the relevant amount apportioned to the hybrid payee upon an apportionment of that amount between all the hybrid payees on a just and reasonable basis having regard (in particular) to—

(i)any arrangements as to profit sharing that may exist between some or all of the payees, and

(ii)the extent to which it is reasonable to suppose that the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5) arises by reason of each hybrid payee being a hybrid entity.

(7)The investor's share of the appropriate proportion of the relevant amount is to be determined by apportioning that proportion of that amount between all the investors in the hybrid payee on a just and reasonable basis, having regard (in particular) to any arrangements as to profit sharing that may exist between some or all of those investors.

(8)An amount of income that is treated as arising under subsection (4) or (5) is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(23) of that Act).

(9)The “counteraction period” means—

(a)if an accounting period of the investor coincides with the payment period, that accounting period, or

(b)otherwise, the first accounting period of the investor that is wholly or partly within the payment period.