Commentary

D4.720 Hybrid entity double deduction mismatches

Corporate tax
Corporate tax | Commentary

D4.720 Hybrid entity double deduction mismatches

Corporate tax | Commentary

Hybrid and other mismatches—double deduction outcomes

D4.720 Hybrid entity double deduction mismatches

There are three conditions which must all be met for the rules restricting a double deduction to apply, as follows1:

  1.  

    (a)     there is an amount (or part thereof) which it is reasonable to suppose could both be deducted from the income of a hybrid entity for a taxable period and be deducted from the income of an investor in the hybrid entity for a taxable period (this amount is the 'hybrid entity double deduction amount'

  2.  

    (b)     either the hybrid entity or the investor in it is within the charge to corporation tax

  3.  

    (c)     the hybrid entity and any investor in it are related2 during a relevant timeframe involving the double deduction amount, or the arrangement is a 'structured arrangement' (ie one where it would be reasonable to assume that the arrangement is designed to secure a hybrid entity double deduction amount or the economic benefit of the amount is shared between the parties to reflect the fact that the double deduction amount is expected to arise)

Counteraction

Where the investor is within the charge to corporation tax3 the hybrid entity double deduction

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