INTM553090 - Hybrids: hybrid payer (Chapter 5): counteraction

The hybrid payer deduction/non-inclusion mismatch requires either the hybrid payer or the payee to be within the charge to UK corporation tax.

Where the hybrid payer is within the charge to UK corporation tax, section 259EC provides for a counteraction to reduce or eliminate the allowable deduction available to the hybrid payer. This is discussed at INTM553100.

Where it is the payee that is within the charge to UK corporation tax, and no provision equivalent to s259EC exists in the payer’s jurisdiction to counteract the deduction available to the payer (or the deduction is not fully counteracted by an equivalent provision), then 259ED provides an alternative counteraction which requires the payee to bring into charge a relevant amount as income. This is discussed at INTM553110.

Any counteraction may be mitigated if, and to the extent that, the payer has dual inclusion income.

Priority of counteraction

Counteraction to address the hybrid payer deduction/non-inclusion mismatch is considered first in respect of the hybrid payer (the primary counteraction). You should consider the counteraction against the payee(s) (the secondary counteraction) only if the hybrid payer is not within the charge to UK corporation tax.