Textual Amendments
F1Pt. 6A inserted (with effect in accordance with Sch. 10 paras. 18-21 of the amending Act) by Finance Act 2016 (c. 24), Sch. 10 para. 1
(1)This section applies where the hybrid payer is within the charge to corporation tax for the payment period.
(2)For corporation tax purposes, the relevant deduction so far as it does not exceed the hybrid payer deduction/non-inclusion mismatch mentioned in section 259EA(5) (“the restricted deduction”) may not be deducted from the hybrid payer's income for the payment period unless it is deducted from dual inclusion income for that period.
(3)So much of the restricted deduction (if any) as, by virtue of subsection (2), cannot be deducted from the payer's income for the payment period—
(a)is carried forward to subsequent accounting periods of the payer, and
(b)for corporation tax purposes, may be deducted from dual inclusion income for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(4)In this section “dual inclusion income” of the payer for an accounting period means an amount that F2... is both—
(a)ordinary income of the payer for that period for corporation tax purposes, and
(b)ordinary income of an investor in the payer for a permitted taxable period for the purposes of any tax charged under the law of an investor jurisdiction.
(5)A taxable period of an investor is “permitted” for the purposes of paragraph (b) of subsection (4) if—
(a)the period begins before the end of 12 months after the end of the accounting period mentioned in paragraph (a) of that subsection, or
(b)where the period begins after that—
(i)a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii)it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
[F3(6)For the purposes of subsection (4)(b) the reference to ordinary income of an investor in the payer for a permitted taxable period for the purposes of any tax charged under the law of an investor jurisdiction is taken to include a reference to an amount that meets the following requirements.
(7)The requirements are that—
(a)the amount may not be deducted under the law of any territory from the income of any person for the purposes of calculating taxable profits for a relevant taxable period;
(b)in the case of a person resident for tax purposes in a zero-tax territory, the amount could not be deducted from the income of the person for the purposes of calculating taxable profits for a relevant taxable period if the person were resident in the United Kingdom for tax purposes; and
(c)under the law of the investor jurisdiction, the amount could be deducted from the income of the investor in the hybrid payer for the purposes of calculating the investor's taxable profits for a relevant taxable period if the following assumptions were made.
(8)The assumptions are that, for the purposes of identifying the recipient of the amount for tax purposes in the investor jurisdiction—
(a)condition B in section 259BE(3) was not met by the hybrid payer as respects the investor jurisdiction, and
(b)as a result of that, the hybrid payer was not a hybrid entity as respects the investor jurisdiction.
(9)In subsection (7), “zero-tax territory”, in relation to a person, means a territory in which the person—
(a)is not within the charge to tax, or
(b)is within the charge to tax at a nil rate.
(10)Section 259B(5) (determination of residence where no concept of residence for tax purposes exists) applies to the reference in subsection (7)(b) to a person's residence for tax purposes in a zero-tax territory as it applies to references to a person's residence for tax purposes in Chapter 8 or 11.
(11)A taxable period of an investor or another person is “relevant” for the purposes of subsection (7) if—
(a)the period begins before the end of 12 months after the end of the accounting period mentioned in subsection (4)(a), or
(b)where the period begins after that, it is just and reasonable for the question of whether the amount concerned may or could be deducted in calculating taxable profits to be determined by reference to that taxable period rather than an earlier period.]]
Textual Amendments
F2Words in s. 259EC(4) omitted (with effect in accordance with Sch. 7 paras. 37-39 of the amending Act) by virtue of Finance Act 2021 (c. 26), Sch. 7 para. 10(2)
F3S. 259EC(6)-(11) inserted (with effect in accordance with Sch. 7 paras. 37-39 of the amending Act) by Finance Act 2021 (c. 26), Sch. 7 para. 10(3)