259JC Counteraction where mismatch arises because of a relevant multinational and the UK is the parent jurisdiction
(1) This section applies where—
(a) the dual territory double deduction amount arises by reason of the company being a relevant multinational company, and
(b) the United Kingdom is the parent jurisdiction.
(2) If some or all of the dual territory double deduction amount is (in substance) deducted (“the impermissible overseas deduction”), for the purposes of a tax under the law of a territory outside the United Kingdom, from the income of any person, for any taxable period, that is not dual inclusion income of the company—
(a) the dual territory double deduction amount that may be deducted, for corporation tax purposes, from the company's income for the deduction period is reduced by the amount of the impermissible overseas deduction, and
(b) such just and reasonable adjustments (if any) as are required to give effect to that reduction, for corporation tax purposes, are to be made.
(3) Any adjustment required to be made under subsection (2) may be made (whether or not by an officer of Revenue and Customs)—
(a) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise, and
(b) despite any time limit imposed by or under any enactment.
(4) In this section “dual inclusion income” of the company means an amount that is both—
(a) ordinary income of the company for an accounting period for corporation tax purposes, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom.
(5) A taxable period 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 of the company 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.
259JD Counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction
(1) This section applies where—
(a) the dual territory double deduction amount arises as a result of the company being a relevant multinational company,
(b) the United Kingdom is the PE jurisdiction, and
(c) it is reasonable to suppose that no provision of the law of the parent jurisdiction that is equivalent to section 259JC applies.
(2) For corporation tax purposes, the dual territory double deduction amount may not be deducted from the company's income for the deduction period unless it is deducted from dual inclusion income of the company for that period.
(3) So much of the dual territory double deduction amount (if any) as, by virtue of subsection (2), cannot be deducted from the company's income for the deduction period—
(a) is carried forward to subsequent accounting periods of the company, and
(b) for corporation tax purposes, may be deducted from dual inclusion income of the company 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) If the Commissioners are satisfied that the company has ceased to be a relevant multinational company, any of the dual territory double deduction amount that has not been deducted from dual inclusion income in accordance with subsection (2) or (3) (“the stranded deduction”) may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the company's taxable total profits of the accounting period in which it ceased to be a relevant multinational company.
(5) So much of the stranded deduction (if any) as cannot be deducted, in accordance with subsection (4), at step 2 in section 4(2) of CTA 2010 in calculating the company's taxable total profits of the accounting period in which the company ceased to be a relevant multinational company—
(a) is carried forward to subsequent accounting periods of the company, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(6) Subsection (7) applies if it is reasonable to suppose that all or part of the dual territory double deduction amount is (in substance) deducted (“the illegitimate overseas deduction”), under the law of a territory outside the United Kingdom, from income of any person other than the company, for a taxable period, that is not dual inclusion income of the company for an accounting period.
(7) For the purposes of determining how much of the dual territory double deduction amount may be deducted (if any) for the accounting period of the company in which the taxable period mentioned in subsection (6) ends, and any subsequent accounting periods of the company, an amount of it equal to the illegitimate overseas deduction is to be taken to have already been deducted for a previous accounting period of the company.
(8) In this section “dual inclusion income” of the company for an accounting period means an amount that is both—
(a) ordinary income of the company for that period for corporation tax purposes, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom.
(9) A taxable period of the company is “permitted” for the purposes of paragraph (b) of subsection (8) 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.
(10) For the purposes of subsection (8)(b) the reference to ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom is taken to include a reference to excessive PE inclusion income of the company.
(11) Section 259JE defines “excessive PE inclusion income” of the company for this purpose.
(“1) In section 259JD(10), “excessive PE inclusion income” of the company means—
(a) where paragraph (a) of subsection (4) applies, the PE inclusion income of the company, or
(b) where paragraph (b) of that subsection applies, the PE inclusion income of the company so far as it is reasonable to suppose that it exceeds the aggregate effect on taxable profits.
(2) For this purpose, “PE inclusion income” of a company for an accounting period means an amount in respect of which conditions A and B are met.
(3) Condition A is that the amount is in respect of a transfer of money or money's worth from the company in the parent jurisdiction to the company in the United Kingdom that—
(a) is actually made, or
(b) is (in substance) treated as being made for corporation tax purposes.
(4) Condition B is that it is reasonable to suppose that—
(a) the circumstances giving rise to the amount will not result in—
(i) a reduction in the taxable profits of the company for a relevant taxable period, or
(ii) an increase in a loss made by the company for a relevant taxable period,
for the purposes of a tax charged under the law of the parent jurisdiction, or
(b) those circumstances will result in such a reduction or increase for one or more relevant taxable periods, but the amount exceeds the aggregate effect on taxable profits.
(5) “The aggregate effect on taxable profits” is the sum of—
(a) any reductions, resulting from the circumstances giving rise to the amount, in the taxable profits of the company, for a relevant taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, and
(b) any amounts by which a loss made by the company, for a relevant taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, is increased as a result of the circumstances giving rise to the amount.
(6) For the purposes of subsections (4) and (5), any reduction in taxable profits or increase of losses is to be ignored in any case where tax is charged at a nil rate under the law of the parent jurisdiction.
(7) A taxable period of the company is “relevant” for the purposes of subsections (4) and (5) if—
(a) the period begins before the end of 12 months after the end of the accounting period mentioned in section 259JD(8)(a), or
(b) where the period begins after that, it is just and reasonable for the question of whether the circumstances giving rise to the amount will result in a reduction in taxable profits or an increase in a loss to be determined by reference to that taxable period rather than an earlier period.
(1) This Chapter contains provision denying deductions in connection with payments or quasi-payments that are made under, or in connection with, imported mismatch arrangements where the payer is within the charge to corporation tax for the payment period.
(2) Section 259KA contains the conditions that must be met for this Chapter to apply and defines “imported mismatch payment” and “imported mismatch arrangement”.
(3) Section 259KB defines “dual territory double deduction”, “excessive PE deduction” and “PE jurisdiction”.
(4) Section 259KC contains provision for denying some or all of a relevant deduction in relation to an imported mismatch payment.
(4A) Section 259KD provides for relief where an amount is deducted from dual inclusion income.
(4B) Section 259KE sets a limit on reductions under section 259KC.
(4C) Section 259KF contains provision for cases also falling within Part 4 (transfer pricing).
(5) See also section 259BB for the meaning of “payment”, “quasi-payment”, “relevant deduction”, “payment period” and “payer”.
(1) This Chapter applies if conditions A to G are met.
(2) Condition A is that a payment or quasi-payment (“the imported mismatch payment”) is made under, or in connection with, an arrangement (“the imported mismatch arrangement”).
(3) Condition B is that, in relation to the imported mismatch payment, the payer (“P”) is within the charge to corporation tax for the payment period.
(4) Condition C is that the imported mismatch arrangement is one of a series of arrangements.
(5) A “series of arrangements” means a number of arrangements that are each entered into (whether or not one after the other) in pursuance of, or in relation to, another arrangement (“the over-arching arrangement”).
(6) Condition D is that—
(a) under an arrangement in the series other than the imported mismatch arrangement, there is a payment or quasi-payment (“the mismatch payment”) in relation to which it is reasonable to suppose that there is or will be—
(i) a hybrid or otherwise impermissible deduction/non-inclusion mismatch (see section 259CB),
(ii) a hybrid transfer deduction/non-inclusion mismatch (see section 259DC),
(iii) a hybrid payer deduction/non-inclusion mismatch (see section 259EB),
(iv) a hybrid payee deduction/non-inclusion mismatch (see section 259GB),
(v) a multinational payee deduction/non-inclusion mismatch (see section 259HB),
(vi) a hybrid entity double deduction amount (see section 259IA(4)), or
(vii) a dual territory double deduction (see section 259KB), or
(b) as a consequence of an arrangement in the series other than the imported mismatch arrangement, there is or will be an excessive PE deduction (see section 259KB),
and in this Chapter “the relevant mismatch” means the mismatch, amount or deduction concerned.
(7) Condition E is that it is reasonable to suppose that the relevant mismatch is not capable of counteraction.
(7A) A relevant mismatch is capable of counteraction to the extent it is capable of being considered, for the purposes of determining the tax treatment of a person, other than P, under the law of a territory that is OECD mismatch compliant.
(7B) If a proportion of the relevant mismatch is not capable of being so considered under the law of any such territory—
(a) Condition E is met in relation to that proportion, and
(b) the remainder of the relevant mismatch is to be ignored for the purposes of this Part.
(7C) A determination about the extent to which a relevant mismatch is capable of being so considered is to be made on a just and reasonable basis.
(7D) A territory is OECD mismatch compliant if under the law of that territory effect is given to the Final Report on Neutralising the Effects of Hybrid Mismatch Arrangements published by the Organisation for Economic Cooperation and Development on 5 October 2015 or any replacement or supplementary publication (within the meaning of section 259BA(3)).
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) Condition G is that—
(a) subsection (6)(a) applies and P is in the same control group (see section 259NB) as a payee, in relation to the mismatch payment, at any time in the period—
(i) beginning with the day the over-arching arrangement is made, and
(ii) ending with the last day of the payment period in relation to the imported mismatch payment,
(b) subsection (6)(b) applies and P is in the same control group as the company in relation to whom the excessive PE deduction arises at any time in that period, or
(c) the imported mismatch arrangement, or the over-arching arrangement, is a structured arrangement.
(10) The imported mismatch arrangement, or the over-arching arrangement, is a “structured arrangement” if it is reasonable to suppose that—
(a) the arrangement concerned is designed to secure the relevant mismatch, or
(b) the terms of the arrangement concerned share the economic benefit of the relevant mismatch between the parties to that arrangement or otherwise reflect the fact that the relevant mismatch is expected to arise.
(11) An arrangement may be designed to secure the relevant mismatch despite also being designed to secure any commercial or other objective.
(12) Section 259KC contains provision for denying all or part of the relevant deduction in relation to the imported mismatch payment by reference to the relevant mismatch.
259KB Meaning of “dual territory double deduction”, “excessive PE deduction” and “PE jurisdiction”
(1) This section has effect for the purposes of this Chapter.
(2) A “dual territory double deduction” means an amount that can be deducted by a company both—
(a) from income for the purposes of a tax charged under the law of one territory, and
(b) from income for the purposes of a tax charged under the law of another territory.
(3) A “PE deduction” is an amount that—
(a) may (in substance) be deducted from a company's income for the purposes of calculating the company's taxable profits, for a taxable period, for the purposes of a tax that is charged on the company, under the law of a territory (“the PE jurisdiction”), by virtue of the company having a permanent establishment in that territory, and
(b) is in respect of a transfer of money or money's worth, from the company in the PE jurisdiction to the company in another territory (“the parent jurisdiction”) in which it is resident for the purposes of a tax, that—
(i) is actually made, or
(ii) is (in substance) treated as being made for tax purposes.
(3A) For the purposes of this section a “PE deduction” does not include—
(a) a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or
(b) an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.
(4) A PE deduction is “excessive” so far as it exceeds the sum of—
(a) any increases, resulting from the circumstances giving rise to the PE deduction, in the taxable profits of the company, for a permitted taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, and
(b) any amounts by which a loss made by the company, for a permitted taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, is reduced as a result of the circumstances giving rise to the PE deduction.
(4A) For the purposes of subsection (4) any increase in taxable profits or reduction of losses is to be ignored in any case where tax is charged at a nil rate under the law of the parent jurisdiction.
(5) A taxable period of the company is “permitted” for the purposes of subsection (4) if—
(a) the period begins before the end of 12 months after the end of the taxable period mentioned in subsection (3)(a), or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period for the purposes of subsection (4), and
(ii) it is just and reasonable for the circumstances giving rise to the PE deduction to affect the profits or loss made for that period rather than an earlier period.
259KC Denial of the relevant deduction in relation to the imported mismatch payment
(1) If, in addition to the imported mismatch payment, there are, or will be, one or more relevant payments in relation to the relevant mismatch, subsection (3) applies.
(2) Otherwise, for corporation tax purposes, in relation to the imported mismatch payment, the relevant deduction that may be deducted from P's income for the payment period is to be reduced by the amount of the relevant mismatch.
(2A) But any reduction under this section has effect subject to section 259KD (deductions from dual inclusion income) and section 259KE (limit on reduction under section 259KC).
(3) For corporation tax purposes, where this subsection applies, in relation to the imported mismatch payment, the relevant deduction that may be deducted from P's income for the payment period is to be reduced by P's share of the relevant mismatch.
(4) P's share of the relevant mismatch is to be determined by apportioning the relevant mismatch between P and every payer in relation to a relevant payment on a just and reasonable basis—
(a) where section 259KA(6)(a) applies, having regard (in particular) to the extent to which the imported mismatch payment and each relevant payment funds (directly or indirectly) the mismatch payment, or
(b) where the relevant mismatch is an excessive PE deduction, having regard (in particular) to—
(i) if the transfer of money or money's worth mentioned in section 259KB(3)(b) is actually made, the extent to which the imported mismatch payment and each relevant payment funds (directly or indirectly) the transfer, or
(ii) if the transfer of money or money's worth mentioned in section 259KB(3)(b) is (in substance) treated as being made, the extent to which the imported mismatch payment and each relevant payment would have funded (directly or indirectly) the transfer if it had actually been made.
(5) For the purposes of subsection (4)(a) and (b)(i), the imported mismatch payment is to be taken to fund the mismatch payment or transfer to the extent that the mismatch payment or transfer cannot be shown instead to be funded (directly or indirectly) by one or more relevant payments.
(6) For the purposes of subsection (4)(b)(ii), it is to be assumed that the imported mismatch payment would have funded the transfer if it had actually been made to the extent that it cannot be shown by P that, if it had been made, the transfer would have instead been funded (directly or indirectly) by one or more relevant payments.
(7) For the purposes of this section, a payment or quasi-payment, other than the imported mismatch payment or any mismatch payment, is a “relevant payment” in relation to the relevant mismatch if it is made under an arrangement in the series of arrangements mentioned in section 259KA(4) and—
(a) where section 259KA(6)(a) applies, it funds (directly or indirectly) the mismatch payment,
(b) where the relevant mismatch is an excessive PE deduction and the transfer of money or money's worth mentioned in section 259KB(3)(b) is actually made, it funds (directly or indirectly) that transfer, or
(c) where the relevant mismatch is an excessive PE deduction and the transfer of money or money's worth mentioned in section 259KB(3)(b) is (in substance) treated as being made, it would have funded (directly or indirectly) that transfer had that transfer actually been made.
(8) In proceedings before a court or tribunal in connection with this section—
(a) in relation to subsection (1), it is for P to show that, in addition to the imported mismatch payment, there are one or more relevant payments in relation to the relevant mismatch, and
(b) in relation to subsection (5), it is for P to show that the mismatch payment or transfer is funded (directly or indirectly) by one or more relevant payments instead of by the imported mismatch payment.
(1) If—
(a) section 259KA(6)(a) applies as a result of any of sub-paragraphs (iii) to (vii), or
(b) section 259KA(6)(b) applies,
a reduction under section 259KC is not to exceed the relevant net amount.
(2) For the purposes of this section “the relevant net amount” means—
(a) if section 259KA(6)(a)(iii), (iv), (v) or (vi) applies, the amount which, if Chapter 5, 7, 8 or 9 applied to the tax treatment of any person in respect of the mismatch payment, could not be deducted from that person’s income under that Chapter (ignoring the effect of any of the carry-forward provisions),
(b) if section 259KA(6)(a)(vii) applies, the amount by which the dual territory double deduction of the company mentioned in section 259KB(2) for a deduction period exceeds its dual inclusion income for that period, or
(c) if section 259KA(6)(b) applies, the amount by which the excessive PE deduction of the company mentioned in section 259KB(4) for the permitted taxable period mentioned there exceeds its dual inclusion income for that period.
(3) In subsection (2)(a) “the carry-forward provisions” means—
(a) section 259EC(3) (hybrid payer deduction/non-inclusion mismatches),
(b) section 259IB(3) to (5) (hybrid entity double deduction mismatches: investor within charge to corporation tax), and
(c) section 259IC(5) to (7) (hybrid entity double deduction mismatches: hybrid entity within charge to corporation tax).
(4) In subsection (2)(b) “dual inclusion income” of a company for a deduction period (that is to say, a period for which the dual territory double deduction is deducted as mentioned in section 259KB(2)(a)) means an amount that is both—
(a) ordinary income of the company for that period for the purposes of a tax charged as mentioned in section 259KB(2)(a), and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged as mentioned in section 259KB(2)(b).
(5) A taxable period of the company is “permitted” for the purposes of subsection (4)(b) if—
(a) the period begins before the end of 12 months after the end of the deduction period, or
(b) where that 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.
(6) In subsection (2)(c) “dual inclusion income” of a company for a period means an amount that is both—
(a) ordinary income of the company for that period for the purposes of a tax charged under the law of the PE jurisdiction, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of the parent jurisdiction.
(7) A taxable period of the company is “permitted” for the purposes of paragraph (b) of subsection (6) if—
(a) the period begins before the end of 12 months after the end of the 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.
(1) This section applies where, in relation to the imported mismatch payment, the relevant deduction that may be deducted from P's income for a payment period is to be reduced under section 259KC.
(2) The reduction is not to exceed the amount that the relevant mismatch would have been if the amount of the mismatch payment had been equal to the amount of the imported mismatch payment.
(1) This section applies where, in calculating the profits and losses of P for tax purposes, the amount to be deducted in respect of the imported mismatch payment is required to be reduced (whether or not to nil) under section 147(3) or (5) (tax calculations to be based on arm's length, not actual, provision).
(2) For the purposes of section 259KC(2), the amount of the relevant mismatch is to be determined as if the mismatch payment was reduced by the same proportion as the reduction mentioned in subsection (1).
(3) For the purposes of section 259KC(3)—
(a) the amount of the relevant mismatch is taken to be the amount it would have been had the arm's length provision been made or imposed instead of the actual provision in relation to the imported mismatch payment (making such assumptions as to the amount of the mismatch payment as are reasonable in the circumstances), and
(b) P's share of the relevant mismatch is to be determined accordingly.
(4) In subsection (3) “the arm's length provision” and “the actual provision” are to be construed in accordance with section 147(1).
259L Adjustments where suppositions cease to be reasonable
(1) Where—
(a) a reasonable supposition is made for the purposes of any provision of this Part, and
(b) the supposition turns out to be mistaken or otherwise ceases to be reasonable,
such consequential adjustments as are just and reasonable may be made.
(2) The adjustments may be made (whether or not by an officer of Revenue and Customs) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.
(3) But the power to make adjustments by virtue of this section is subject to any time limit imposed by or under any enactment other than this Part.
(4) No adjustment is to be made under this section on the basis that an amount of ordinary income arises, as a result of a payment or quasi-payment, to a payee after that payee's last permitted taxable period in relation to the payment or quasi-payment (see section 259LA, which makes provision about certain such cases).
259LA Deduction from taxable total profits where an amount of ordinary income arises late
(1) This section applies where—
(a) a relevant deduction in respect of a payment or quasi-payment is reduced by section 259CD, 259DF, 259GC or 259HC or by more than one of those sections,
(b) no other provision of this Part, or any equivalent provision of the law of a territory outside the United Kingdom, applies or will apply to the tax treatment of any person in respect of the payment or quasi-payment,
(c) the section or sections had effect because it was reasonable to suppose that the relevant deduction exceeded, or would exceed, the sum of the amounts of ordinary income arising, by reason of the payment or quasi-payment, to each payee for a permitted taxable period, and
(d) an amount of ordinary income (“the late income”) arises—
(i) by reason of the payment or quasi-payment, but
(ii) not as a consequence of any provision of this Part or any equivalent provision of the law of a territory outside the United Kingdom,
to a payee for a taxable period (“the late period”) that is not a permitted taxable period.
(2) An amount equal to the late income may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the payer's taxable total profits of the accounting period in which the late period ends.
(3) So much of that amount (if any) as cannot be deducted, in accordance with subsection (2), at step 2 in section 4(2) of CTA 2010 in calculating the taxable total profits of the accounting period in which the late period ends—
(a) is carried forward to subsequent accounting periods of the payer, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(4) But the total amount deducted from taxable total profits under this section, in relation to a payment or quasi-payment, may not exceed the total amount by which the relevant deduction is reduced as mentioned in (1)(a).
(5) In this section “permitted taxable period”—
(a) where the relevant deduction was reduced under section 259CD, has the meaning given by section 259CC(2),
(b) where the relevant deduction was reduced under section 259DF, has the meaning given by section 259DD(2),
(c) where the relevant deduction was reduced under section 259GC, has the meaning given by section 259GB(6),
(d) where the relevant deduction was reduced under section 259HC, has the meaning given by section 259HB(4), or
(e) where the relevant deduction was reduced under two or more of the sections mentioned in the preceding paragraphs of this subsection, includes any taxable period that is a permitted period under a provision mentioned in the paragraphs concerned.
259LB Adjustments in light of later treatment for accounting purposes
(1) This section applies where—
(a) a payment or quasi-payment gives rise to a debit of a company that is recognised for accounting purposes,
(b) a relevant deduction of the company in respect of some or all of the debit is reduced by any provision of this Part,
(c) there is a reversal of some or all of the debit by a credit of the company that is recognised for accounting purposes after the end of the payment period, and
(d) the credit is brought into account for corporation tax purposes.
(2) Such consequential adjustments as are just and reasonable may be made in respect of so much of the debit as gives rises to the relevant deduction and as is reversed by the credit.
(3) The adjustments may be made (whether or not by an officer of Revenue and Customs) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.
(4) The power to make adjustments by virtue of this section may be exercised despite any time limit imposed by or under any enactment.
(1) This Chapter contains provision that allows surplus dual inclusion income to be allocated within a group of companies.
(2) Section 259ZMA contains the conditions that must be met for this Chapter to apply.
(3) Subsection (2) of that section defines “the DII surplus” and subsection (3) of that section defines “the DII shortfall”.
(4) Sections 259ZMB to 259ZMD contain provision allowing the unused part of the DII surplus of one company to be treated as dual inclusion income of another company in the same group, where it can be matched against the unused part of the DII shortfall of the other company.
(5) Section 259ZME identifies when companies are in the same group.
(1) This Chapter applies if conditions A to E are met.
(2) Condition A is that, for an accounting period (“the surplus period”), the dual inclusion income of a company (“company A”) exceeds its counteraction amount.
In this Chapter, the amount of the excess is referred to as “the DII surplus”.
(3) Condition B is that, for an accounting period (“the shortfall period”), the counteraction amount of another company (“company B”) exceeds its dual inclusion income.
In this Chapter, the amount of the excess is referred to as “the DII shortfall”.
(4) See section 259ZMF for the meanings of “dual inclusion income” and “counteraction amount”.
(5) Condition C is that there is a period (“the overlapping period”) that is common to both the surplus period and the shortfall period (and see subsections (8) and (9)).
(6) Condition D is that there is a time during the overlapping period when both company A and company B are within the charge to corporation tax.
(7) Condition E is that there is a time during the overlapping period when company A and company B are members of the same group of companies (see section 259ZME).
(8) Subsection (9) applies if, during any part of the overlapping period—
(a) either company A or company B is not within the charge to corporation tax, or
(b) company A and company B are not members of the same group of companies.
(9) That part is treated as not forming part of the overlapping period but instead as—
(a) forming part of the surplus period that is not included in the overlapping period, and
(b) forming part of the shortfall period that is not included in the overlapping period.
(1) Company B may make a claim (an “allocation claim”) for all or part of the unused part of the DII surplus of company A for the overlapping period (see section 259ZMC) to be allocated to company B for the shortfall period, if the following requirements are met.
Requirement 1 Company A consents to the allocation claim.
Requirement 2 The allocation claim identifies the amount of the DII surplus to which it relates.
Requirement 3 Company B has an amount of ordinary income for the shortfall period (“matchable income”) that—
is not dual inclusion income, and
is equal to or exceeds the amount of the DII surplus to which the allocation claim relates.
Requirement 4 The allocation claim identifies the amount of matchable income to which the claim relates.
Requirement 5 The amount of matchable income to which the claim relates—
is equal to the amount of the DII surplus to which the claim relates, and
does not exceed the unused part of the DII shortfall of company B for the shortfall period (see section 259ZMD).
(2) If company B makes an allocation claim—
(a) the amount of company A's dual inclusion income for the surplus period is reduced by the amount of matchable income to which the claim relates, and
(b) the amount of matchable income to which the claim relates is treated in relation to company B as if the following assumptions were made.
(3) The assumptions are that—
(a) things done by or to company A in relation to that amount are treated as done by or to company B, and
(b) all other factual circumstances (or circumstances treated as existing as a result of any provision made by this Part) in relation to that amount are unchanged.
(1) This section identifies the unused part of the DII surplus of company A for the overlapping period, for the purposes of an allocation claim made by company B (“the current allocation claim”).
(2) The unused part of the DII surplus of company A for the overlapping period is the amount equal to—
(a) the DII surplus for the overlapping period (see subsection (3)), less
(b) the amount of prior allocations for that period (see subsections (4) to (7)).
(3) To determine the DII surplus for the overlapping period—
(a) take the proportion of the surplus period included in the overlapping period, and
(b) apply that proportion to the DII surplus for the surplus period.
The DII surplus for the overlapping period is the amount given as a result of paragraph (b).
(4) To determine the amount of prior allocations for the overlapping period—
(a) identify any prior allocation claims for the purposes of this section (see subsection (5)), and
(b) take the steps set out in subsection (6) in relation to each such claim.
The amount of prior allocations for the overlapping period is the total of the previously used amounts given at Step 3 in subsection (6) for all the prior allocation claims.
(5) An allocation claim is a prior allocation claim for the purposes of this section if—
(a) it is an allocation claim made by a company in respect of all or part of the DII surplus of company A for the surplus period,
(b) it is made before the current allocation claim, and
(c) it has not been withdrawn.
(6) These are the steps referred to in subsection (4)(b) to be taken in relation to each prior allocation claim.
Step 1 Identify the overlapping period for the prior allocation claim.
Step 2 Identify any period that is common to the overlapping period for the current allocation claim and the overlapping period for the prior allocation claim. If there is a common period, go to Step 3. If there is no common period, there is no previously allocated amount in relation to the prior allocation claim (and ignore Step 3).
Step 3 Determine the previously allocated amount of the DII surplus in relation to the prior allocation claim (see subsection (7)).
(7) To determine the previously allocated amount of the DII surplus in relation to the prior allocation claim—
(a) take the proportion of the overlapping period for the prior allocation claim that is included in the common period identified at Step 2 in subsection (6) in relation to that claim, and
(b) apply that proportion to the amount of the DII surplus allocated on the prior allocation claim.
The previously allocated amount of the DII surplus in relation to the prior allocation claim is the amount given as a result of paragraph (b).
(8) If two or more allocation claims are made at the same time, for the purposes of this section treat the claims as made—
(a) in such order as the companies making them may jointly elect, or
(b) if no such election is made, in such order as an officer of Revenue and Customs may direct.
(9) For the purposes of Step 3 in subsection (6), the amount of the DII surplus allocated on a prior allocation claim is determined on the basis that an amount is allocated on the claim before it is allocated on a later claim.
(10) If the use of the proportion mentioned in subsection (3) or (7) would, in the circumstances of a particular case, produce a result that is unjust or unreasonable, the proportion is to be modified so far as necessary to produce a result that is just and reasonable.
(1) This section identifies the unused part of the DII shortfall of company B for the shortfall period, for the purposes of an allocation claim made by company B (“the current allocation claim”).
(2) The unused part of the DII shortfall of company B for the shortfall period is the amount equal to—
(a) the DII shortfall for the shortfall period, less
(b) the amount of prior matches for the shortfall period (see subsections (3) to (5)).
(3) To determine the amount of prior matches for the shortfall period—
(a) identify any prior allocation claims for the purposes of this section (see subsection (4)), and
(b) determine the previously matched amount of the DII shortfall in relation to each prior allocation claim (see subsection (5)).
The amount of prior matches for the shortfall period is the total of the previously matched amounts of the DII shortfall in relation to all the prior allocation claims.
(4) An allocation claim is a prior allocation claim for the purposes of this section if—
(a) it is an allocation claim made by company B for the shortfall period,
(b) it is made before the current allocation claim, and
(c) it has not been withdrawn.
(5) The previously matched amount of the DII shortfall in relation to a prior allocation claim is the amount that is treated as dual inclusion income of company B for the shortfall period as a result of the claim (see section 259ZMB(3)(a)).
(6) If two or more allocation claims are made at the same time, for the purposes of this section treat the claims as made—
(a) in such order as company B may elect, or
(b) if no such election is made, in such order as an officer of Revenue and Customs may direct.
(7) For the purposes of subsection (3)(b), the amount of the DII shortfall matched in relation to a prior allocation claim is determined on the basis that an amount is matched on the claim before it is matched on a later claim.
(1) For the purposes of this Chapter, company A and company B are members of the same group of companies if—
(a) one is a 75% subsidiary of the other, or
(b) both are 75% subsidiaries of a third company.
(2) In subsection (1), “75% subsidiary” has the same meaning as in Part 5 of CTA 2010 (group relief) (see section 151 of that Act).
(3) Sections 154, 155A, 155B and 156 of CTA 2010 (members of group of companies: arrangements for transfers of companies) apply for the purposes of this Chapter as they apply for the purposes of Part 5 of CTA 2010, but as if references to a surrenderable amount were to the DII surplus.
259ZMF Meaning of “dual inclusion income” and “counteraction amount”
(1) This section applies for the purposes of this Chapter.
(2) The “dual inclusion income” of a company for an accounting period means the amount of any income that is dual inclusion income of the company for that period for the purposes of any provision of this Part.
(3) An amount of income that is dual inclusion income of a company for the purposes of more than one provision of this Part is not counted more than once for the purposes of subsection (2).
(4) The “counteraction amount” of a company for an accounting period means the total of all the following amounts that are applicable to the company for that period—
(a) the restricted deduction, within the meaning given by section 259EC(2);
(b) where section 259ED applies and there is only one payee, the relevant amount, within the meaning given by section 259ED(3);
(c) where section 259ED applies and there is more than one payee, the payee's share of the relevant amount, within the meaning given by section 259ED(3) and (6);
(d) the excessive PE deduction, within the meaning given by section 259FA(8);
(e) where section 259IB applies, the hybrid entity double deduction amount, within the meaning given by section 259IA(4);
(f) where section 259IC applies, the restricted deduction, within the meaning given by section 259IC(3);
(g) the dual territory double deduction amount, within the meaning given by section 259JA(5), reduced by the amount of the impermissible overseas deduction (if any), within the meaning given by section 259JC(2);
(h) a dual territory double deduction, within the meaning given by section 259KB(2);
(i) an excessive PE deduction, within the meaning given by section 259KB(3) to (5).
259M Countering the effect of avoidance arrangements
(1) This section applies where—
(a) relevant avoidance arrangements exist,
(b) as a result of those arrangements, any person (whether party to the arrangements or not) would, apart from this section, obtain a relevant tax advantage, and
(c) that person is—
(i) within the charge to corporation tax at the time the person would obtain the relevant tax advantage, or
(ii) would be within the charge to corporation tax at that time but for the relevant avoidance arrangements.
(2) The relevant tax advantage is to be counteracted by making such adjustments to the person's treatment for corporation tax purposes as are just and reasonable.
(3) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.
(4) A person obtains a “relevant tax advantage” if—
(a) the person avoids, to any extent, any provision of this Part, or any equivalent provision of the law of a territory outside the United Kingdom, restricting whether or how that person may make a deduction from income for the purposes of calculating taxable profits, ...
(b) the person avoids, to any extent, an amount being treated as income of that person under any provision of this Part or any equivalent provision of the law of a territory outside the United Kingdom, or
(c) the person does anything which, to any extent, results in an amount being treated as dual inclusion income of that person under any provision of this Part.
(5) “Relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to enable any person to obtain a relevant tax advantage.
(6) But arrangements are not “relevant avoidance arrangements” if the obtaining of the relevant tax advantage can reasonably be regarded as consistent with the principles on which the provisions of this Part, or the equivalent provisions under the law of a territory outside the United Kingdom, that are relevant to the arrangements are based (whether express or implied) and the policy objectives of those provisions.
(7) For the purposes of determining the principles and policy objectives mentioned in subsection (6), regard may, where appropriate, be had to the Final Report on Neutralising the Effects of Hybrid Mismatch Arrangements published by the Organisation for Economic Cooperation and Development (“OECD”) on 5 October 2015 or any replacement or supplementary publication.
(8) In subsection (7) “replacement or supplementary publication” means any document that is approved and published by the OECD in place of, or to update or supplement, the report mentioned in that subsection (or any replacement of, or supplement to, it).
(1) In this Chapter “transparent fund” means a collective investment scheme, or an AIF (that is not a collective investment scheme), if—
(a) were all of the profits or income of the fund to arise from sources inside the United Kingdom and
(b) were all of its participants within the charge to income tax,
its profits or income would be profits or income of its participants for the purposes of that tax.
(2) In this section—
“AIF” has the meaning given by regulation 3 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773);
“collective investment scheme” has the meaning given by section 235 of the Financial Services and Markets Act 2000;
“participant”, in relation to a transparent fund, means a person who—
takes part in the arrangements constituting the fund, whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise, and
does not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.
(1) This section applies where—
(a) Chapter 3, 4, 5 or 7 applies in respect of a payment or quasi-payment,
(b) the relevant structured arrangement condition is not met, and
(c) it is reasonable to suppose that a proportion of the payment or quasi-payment is attributable to a person as a result of that person's interest (direct or indirect) in a transparent fund that is the primary fund in relation to that person.
(2) For the purposes of this section, a proportion of a payment or quasi-payment is attributable to a person if, as a result of that payment or quasi-payment—
(a) ordinary income arises to that person, or
(b) would arise if the person were resident for tax purposes in the United Kingdom.
(3) The primary fund in relation to a person is—
(a) where the income arises or would arise because of an indirect interest the person has in a transparent fund as a result of another transparent fund, or a series of transparent funds, having an interest in that first fund, that first fund, or
(b) where the income arises or would arise because of a direct or indirect interest the person has in a single transparent fund, that fund.
(4) The relevant structured arrangement condition is the condition—
(a) where Chapter 3 applies, in section 259CA(6)(c),
(b) where Chapter 4 applies, in section 259DA(6)(c),
(c) where Chapter 5 applies, in section 259EA(7)(c), and
(d) where Chapter 7 applies, in section 259GA(7)(c).
(5) The Chapter in question applies subject to subsection (6).
(6) If it is reasonable to suppose that the proportion of the payment or quasi-payment that is attributable to a person as a result of the person's interest in the primary fund is less than 10% of the relevant amount, that proportion is to be ignored for the purposes of determining the extent of a mismatch under the Chapter in question.
(7) For the purposes of subsection (6) “the relevant amount” means the amount of ordinary income that it would, on the relevant assumption, have been reasonable to expect to arise to the primary fund as a result of—
(a) in the case of a payment, the payment, or
(b) in the case of a quasi payment, the circumstances giving rise to the relevant deduction (see section 259BB(2)).
(8) The relevant assumption is that the primary fund were a person to whom ordinary income would arise as a result of that payment or those circumstances.
(9) Where a person to whom a proportion of the payment or quasi-payment is attributable as a result of the person's interest in the primary fund is connected (within the meaning given by section 1122 of CTA 2010, ignoring subsections (4) and (7) of that section) to another person to whom a proportion is attributable as a result of that person's interest in that same fund, the rights and interests of those persons are to be aggregated (and accordingly if the proportion attributable between them is 10% or more of the relevant amount, that proportion is not to be ignored).
(1) This section applies where—
(a) Chapter 9 applies in relation to a hybrid entity double deduction amount (see section 259IA(4)) in respect of an investor in a hybrid entity,
(b) the condition in section 259IA(6)(b) is not met, and
(c) that investor in the hybrid entity is an investor in it as a result of an interest (direct or indirect) it has in a transparent fund (“the relevant fund”) that directly holds an interest in—
(i) the hybrid entity, or
(ii) another entity that is not a transparent fund and which holds a direct or indirect interest in the hybrid entity.
(2) Chapter 9 applies subject to subsection (3).
(3) If it is reasonable to suppose that—
(a) some or all of the hybrid entity double deduction amount that relates to the investor arises as a result of the investor's interest in the relevant fund, and
(b) the amount that arises as a result of that interest (“the relevant amount”) is less than 10% of the potential double deduction amount,
the relevant amount is to be ignored for the purposes of determining the extent of a mismatch under that Chapter.
(4) In this section “potential double deduction amount” means the hybrid double deduction amount that would arise in relation to the relevant fund if it were an investor in the hybrid entity.
(5) Where the investor is connected (within the meaning given by section 1122 of CTA 2010, ignoring subsections (4) and (7) of that section) to another investor with an interest in the relevant fund, the rights and interests of those investors are to be aggregated (and accordingly, if the sum of the relevant amounts in respect of each of them is 10% or more of the potential double deduction amount, that proportion is not to be ignored).
(1) Subsection (2) applies where—
(a) Chapter 11 applies as a result of sub-paragraph (i), (ii), (iii) or (iv) of section 259KA(6)(a) applying as a result of a payment or quasi-payment to which section 259MB would apply if the Chapter corresponding to that sub-paragraph applied in relation to that payment or quasi-payment, and
(b) the condition in section 259KA(9)(c) is not met.
(2) Where this subsection applies, section 259MB(6) applies for the purposes of determining the extent of a relevant mismatch under Chapter 11.
(3) The Chapters corresponding to the sub-paragraphs of section 269KA(6)(a) mentioned in subsection (1) are as follows—
Sub-paragraph (i) | Chapter 3
Sub-paragraph (ii) | Chapter 4
Sub-paragraph (iii) | Chapter 5
Sub-paragraph (iv) | Chapter 7.
(4) Subsection (5) applies where—
(a) Chapter 11 applies as a result of section 259KA(6)(a)(vi) applying as a result of a hybrid double deduction amount to which section 259MC would apply if Chapter 9 applied in relation to that amount, and
(b) the condition in section 259KA(9)(c) is not met.
(5) Where this subsection applies, section 259MC(3) applies for the purposes of determining the extent of a relevant mismatch under Chapter 11.
(1) A “financial instrument” means—
(a) an arrangement profits or deficits arising from which would, on the assumption that the person to whom they arise is within the charge to corporation tax, fall to be brought into account for corporation tax purposes in accordance with Part 5 or 6 of CTA 2009 (loan relationships and relationships treated as loan relationships),
(b) a contract profits or losses arising from which would, on the assumption that the person to whom they arise is within the charge to corporation tax, fall to be brought into account for corporation tax purposes in accordance with Part 7 of CTA 2009 (derivative contracts),
(c) a type 1, type 2 or type 3 finance arrangement for the purposes of Chapter 2 of Part 16 of CTA 2010 (factoring of income etc: finance arrangements),
(d) a share forming part of a company's issued share capital or any arrangement that provides a person with economic rights corresponding to those provided by holding such a share, or
(e) anything else that is a financial instrument.
(2) In subsection (1)(e) “financial instrument” has the meaning that it has for the purposes of UK generally accepted accounting practice.
(3) But “financial instrument” does not include—
(a) a hybrid transfer arrangement (within the meaning given by section 259DB), or
(b) anything of a description specified in regulations made by the Treasury.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) “Relevant investment fund” means—
(a) an open-ended investment company within the meaning of section 613 of CTA 2010,
(b) an authorised unit trust within the meaning of section 616 of that Act, or
(c) an offshore fund within the meaning of section 354 of this Act (see section 355),
which meets the genuine diversity of ownership condition (whether or not a clearance has been given to that effect).
(2) “The genuine diversity of ownership condition” means—
(a) in the case of an offshore fund, the genuine diversity of ownership condition in regulation 75 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), and
(b) in the case of an open-ended investment company or an authorised unit trust, the genuine diversity of ownership condition in regulation 9A of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964).
(1) A person (“A”) is in the same control group as another person (“B”)—
(a) throughout any period for which they are consolidated for accounting purposes,
(b) on any day on which the participation condition is met in relation to them, or
(c) on any day on which the 50% investment condition is met in relation to them.
(2) A and B are consolidated for accounting purposes for a period if—
(a) their financial results for the period are required to be comprised in group accounts,
(b) their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or
(c) their financial results for the period are in fact comprised in group accounts.
(3) In subsection (2), “group accounts” means accounts prepared under—
(a) section 399 of the Companies Act 2006, or
(b) any corresponding provision of the law of a territory outside the United Kingdom.
(4) The participation condition is met in relation to A and B (“the relevant parties”) on a day if, within the period of 6 months beginning with the day—
(a) one of the relevant parties directly or indirectly participates in the management, control or capital of the other, or
(b) the same person or persons directly or indirectly participate in the management, control or capital of each of the relevant parties.
(5) For the interpretation of subsection (4), see sections 157(1), 158(4), 159(1) and 160(1) (which have the effect that references in subsection (4) to direct or indirect participation are to be read in accordance with provisions of Chapter 2 of Part 4).
(6) The 50% investment condition is met in relation to A and B if—
(a) A has a 50% investment in B, or
(b) a third person has a 50% investment in each of A and B.
(7) Section 259ND applies for the purposes of determining whether a person has a “50% investment” in another person.
(1) Two persons are “related” on any day that—
(a) they are in the same control group (see section 259NB), or
(b) the 25% investment condition is met in relation to them.
(2) The 25% investment condition is met in relation to a person (“A”) and another person (“B”) if—
(a) A has a 25% investment in B, or
(b) a third person has a 25% investment in each of A and B.
(3) Section 259ND applies for the purposes of determining whether a person has a “25% investment” in another person.
259ND Meaning of “50% investment” and “25% investment”
(1) Where this section applies for the purposes of determining whether a person has a “50% investment” in another person for the purposes of section 259NB(6), references in this section to X% are to be read as references to 50%.
(2) Where this section applies for the purposes of determining whether a person has a “25% investment” in another person for the purposes of section 259NC(2), references in this section to X% are to be read as references to 25%.
(3) A person (“P”) has an X% investment in a company (“C”) if it is reasonable to suppose that—
(a) P possesses or is entitled to acquire X% or more of the share capital or issued share capital of C,
(b) P possesses or is entitled to acquire X% or more of the voting power in C, or
(c) if the whole of C's share capital were disposed of, P would receive (directly or indirectly and whether at the time of disposal or later) X% or more of the proceeds of the disposal.
(4) A person (“P”) has an X% investment in another person (“Q”) if it is reasonable to suppose that—
(a) if the whole of Q's income were distributed, P would receive (directly or indirectly and whether at the time of the distribution or later) X% or more of the distributed amount, or
(b) in the event of a winding-up of Q or in any other circumstances, P would receive (directly or indirectly and whether or not at the time of the winding-up or other circumstances or later) X% or more of Q's assets which would then be available for distribution.
(5) In this section, references to a person receiving any proceeds, amount or assets include references to the proceeds, amount or assets being applied (directly or indirectly) for that person's benefit.
(6) For the purposes of subsections (3) and (4), in determining what percentage investment a person (“P”) has in another person (“U”), where P acts together with a third person (“T”) in relation to U, P is to be taken to have all of T's rights and interests in relation to U.
(7) P is to be taken to “act together” with T in relation to U if (and only if) subsection (7A) or (7B) applies.
(7A) This subsection applies if—
(a) P and T are party to a partnership agreement that—
(i) it is reasonable to suppose is designed to affect the value of any of T's rights or interest in relation to U, or
(ii) relates to the exercise of any of T's rights in relation to U, or
(b) the same person manages—
(i) some or all of P's rights or interests in relation to U, and
(ii) some or all of T's rights or interests in relation to U.
(7B) This subsection applies if P has a relevant investment in U and—
(a) P and T are connected (within the meaning given by section 163),
(b) for the purposes of influencing the conduct of U's affairs—
(i) P is able to secure that T acts in accordance with P's wishes,
(ii) T can reasonably be expected to act, or typically acts, in accordance with P's wishes,
(iii) T is able to secure that P acts in accordance with T's wishes, or
(iv) P can reasonably be expected to act, or typically acts, in accordance with T's wishes, or
(c) P and T are party to any arrangement that—
(i) it is reasonable to suppose is designed to affect the value of any of T's rights or interests in relation to U, or
(ii) relates to the exercise of any of T's rights in relation to U.
(7C) To determine whether P has a “relevant investment” in U at a particular time, subsections (3) and (4) apply but as if—
(a) for “an X%”, in both places, there were substituted “ a relevant ”, and
(b) for “X% or more”, in each place, there were substituted “ greater than 5% ”.
(7D) For that purpose—
(a) subsection (6) is to be ignored, and
(b) P's rights and interests are to be aggregated with the rights and interests of persons connected to P (within the meaning given by section 1122 of CTA 2010, ignoring subsection (4) of that section).
(8) ... P does not “act together” with T in relation to U under paragraph (b) of subsection (7A) where—
(a) the person who manages the rights or interests of P mentioned in sub-paragraph (i) of that paragraph, does so as the operator of a collective investment scheme,
(b) that person manages the rights or interests of T mentioned in sub-paragraph (ii) of that paragraph as the operator of a different collective investment scheme, and
(c) the Commissioners are satisfied that the management of the schemes is not coordinated for the purpose of influencing the conduct of U 's affairs.
(9) In subsection (8) “collective investment scheme” and “operator” have the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see sections 235 and 237 of that Act).
259NDA Meaning of “qualifying institutional investor” etc
(1) This section has effect for the purposes of this Part.
(2) References to “qualifying institutional investor” have the meaning given by paragraph 30A of Schedule 7AC to TCGA 1992.
(3) A qualifying institutional investor is “based” in a territory—
(a) if it is resident for tax purposes in the territory, or
(b) where it is not resident anywhere for tax purposes, if it is established in the territory.
259NE Treatment of a person who is a member of a partnership
(1) This section applies where a person is a member of a partnership.
(2) Any reference in this Part to income, profits or an amount of the person includes a reference to the person's share of (as the case may be) income, profits or an amount of the partnership.
(3) For this purpose “the person's share” of income, profits or an amount is determined by apportioning the income, profits or amount between the partners on a just and reasonable basis.
(4) In this section—
(a) “partnership” includes an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership, and
(b) “member” of a partnership is to be read accordingly.
(1) If the tax treatment of a securitisation company would (apart from this section) fall to be adjusted by virtue of provision in this Part, the provision is to be treated as of no effect as regards that company (and accordingly, no such adjustment may be made).
(2) In this section—
“securitisation company” means a company to which specified regulations apply;
“specified regulations” has the meaning given by regulation 2 of the Taxation of Securitisation Companies Regulations 2006 (S.I. 2006/3296).
(1) This section applies for the purposes of section 259CB(3).
(2) Excess arises in “relevant debt relief circumstances” if (and only if)—
(a) the payment or quasi-payment mentioned in section 259CB(2) comprises the release of a liability to pay an amount under a debtor relationship (within the meaning given by section 302(6) of CTA 2009), and
(b) the circumstances in section 259NEC, 259NED, 259NEE, or 259NEF apply.
(3) For the purposes of those sections references to—
(a) “the relevant release” means the release of liability mentioned in subsection (2)(a),
(b) “loan relationship” is to be construed in accordance with section 302 of CTA 2009,
(c) “amortised cost basis of accounting” is to be construed in accordance with section 313(4) and (4A) of that Act,
(d) “connected companies relationship” is to be construed in accordance with section 348 of that Act, and
(e) “deemed release” and “relevant rights” are to be construed in accordance with section 358(3) to (4A) of that Act.
(1) This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).
(2) The circumstances in this section are—
(a) the relevant release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of the debtor relationship, and
(b) condition A, B, C, D or E is met.
(3) Condition A is that the release is part of a statutory insolvency arrangement (within the meaning of section 1319 of CTA 2009).
(4) Condition B is that the release is not a release of relevant rights and is—
(a) in consideration of shares forming part of the ordinary share capital of a payee, or
(b) in consideration of any entitlement to such shares.
(5) Condition C is that—
(a) a payee meets one of the insolvency conditions (see subsection (8)), and
(b) the debtor relationship is not a connected companies relationship.
(6) Condition D is that the release is in consequence of the making of a mandatory reduction instrument or a third country instrument or the exercise of a stabilisation power under Part 1 of the Banking Act 2009 or the exercise of a third-country instrument or a stabilisation power under Schedule 11 to the Financial Services and Markets Act 2023.
(7) Condition E is that—
(a) the release is neither a deemed release nor a release of relevant rights, and
(b) immediately before the release, it is reasonable to assume that, without the release and any arrangements of which the release forms part, there would be a material risk that at some time within the next 12 months a payee would be unable to pay its debts.
(8) For the purposes of this section a company meets the insolvency conditions if—
(a) it is in insolvent liquidation,
(b) it is in insolvent administration,
(c) it is in insolvent administrative receivership,
(d) an appointment of a provisional liquidator is in force in relation to the company under section 135 of the Insolvency Act 1986 or Article 115 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
(e) under the law of a country or territory outside the United Kingdom circumstances corresponding to those mentioned in paragraph (a), (b), (c) or (d) exist.
(9) Section 323(A1) of CTA 2009 applies for the interpretation of subsection (7)(b); and the rest of that section applies for the interpretation of subsection (8).
(1) This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).
(2) The circumstances in this section are—
(a) the relevant release takes place in an accounting period for which—
(i) an amortised cost basis of accounting is used in respect of the debtor relationship, and
(ii) the debtor relationship is a connected companies relationship, and
(b) the release is neither—
(i) a deemed release, nor
(ii) a release of relevant rights.
259NEE Release of connected companies debts during creditor’s insolvency
(1) This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).
(2) The circumstances in this section are—
(a) the relevant release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of the debtor relationship,
(b) condition A, B, C, D or E in section 357 of CTA 2009 is met in relation to the payer,
(c) immediately before the time when any of those conditions was first met the debtor relationship was a connected companies relationship, and
(d) immediately after that time it was not such a relationship.
259NEF Corporate rescue: debt released shortly after connection arises
(1) This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).
(2) The circumstances in this section are—
(a) the relevant release takes place within 60 days of the payer and a payee becoming connected with one another (within the meaning of section 363 of CTA 2009), and
(b) the corporate rescue conditions are met.
(3) The corporate rescue conditions are—
(a) that the payer and the payee became connected as a result of an arm’s length transaction, and
(b) immediately before the payer and the payee became connected it was reasonable to assume that, without the connection and any arrangements of which the connection forms part, there would be a material risk that at some point within the next 12 months the payee would have been unable to pay its debts.
(4) For the purposes of subsection (3)(b), a payee is unable to pay its debts if—
(a) it is unable to pay its debts as they fall due, or
(b) the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
In this Part—
“arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“CFC” and “CFC charge” have the meaning given by section 259B(4);
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“control group” has the meaning given by section 259NB;
“financial instrument” has the meaning given by section 259N;
“foreign CFC” and “foreign CFC charge” have the meaning given by section 259B(4);
“hybrid entity” has the meaning given by section 259BE;
“investor”, in relation to a hybrid entity, has the meaning given by section 259BE(4);
“investor jurisdiction” has the meaning given by section 259BE(4);
“ordinary income” is to be read in accordance with sections 259BC and 259BD;
“payee”—
in relation to a payment, has the meaning given by section 259BB(6)(a), and
in relation to a quasi-payment, has the meaning given by section 259BB(6)(b);
“payee jurisdiction” has the meaning given by 259BB(9);
“payer”—
in relation to a payment, has the meaning given by section 259BB(1)(a), and
in relation to a quasi-payment, has the meaning given by section 259BB(2);
“payment” has the meaning given by section 259BB(1);
“payment period”—
in relation to a payment, has the meaning given by section 259BB(1)(b), and
in relation to a quasi-payment, has the meaning given by section 259BB(2);
“permanent establishment” has the meaning given by section 259BF;
“quasi-payment” has the meaning given by section 259BB(2) to (5);
“related” has the meaning given by section 259NC;
“relevant deduction”—
in relation to a payment, has the meaning given by section 259BB(1)(b), and
in relation to a quasi-payment, has the meaning given by section 259BB(2)(a);
“relevant investment fund” has the meaning given by section 259NA;
“tax” has the meaning given by section 259B;
“taxable period” means—
in relation to corporation tax, an accounting period,
in relation to income tax, a tax year,
in relation to the CFC charge, a relevant corporation tax accounting period (within the meaning given by section 371BC(3)),
in relation to a foreign CFC charge, a period (by whatever name known) that corresponds to a relevant corporation tax accounting period, and
in relation to any other tax, a period for which the tax is charged;
“taxable profits” is to be read in accordance with sections 259BC(2) and 259BD(5).