INTM559260 - Hybrids: imported mismatches (Chapter 11): conditions to be satisfied: condition F

Condition F was repealed by Finance Act 2021. It will therefore not be relevant to payments made after the date of Royal Assent of the Finance Bill, or in the case of quasi-payments, to payment periods beginning after the date of Royal Assent.

Condition F was that

  • it is reasonable to suppose that Chapters 3 to 5 or Chapters 7 to 10 would apply to the payer of the imported mismatch payment if that person were a payer or payee in relation to the mismatch payment
  • it is reasonable to suppose that Chapters 3 to 5 or Chapters 7 to 10 would apply to the payer of the imported mismatch payment in relation to the mismatch payment if that person were an investor in a hybrid entity and the relevant mismatch were either a hybrid payee deduction/non-inclusion mismatch or a hybrid entity double deduction
  • it is reasonable to suppose that a non-UK provision equivalent to Chapters 3 to 5 or Chapters 7 to 10 would apply in relation to the payer of the imported mismatch payment if that person were a payer or payee in relation to the mismatch payment
  • it is reasonable to suppose that a non-UK provision equivalent to Chapters 3 to 5 or Chapters 7 to 10 would apply to the payer of the imported mismatch payment in relation to the mismatch payment if that person were an investor in a hybrid entity and the relevant mismatch is either a hybrid payee deduction/non-inclusion mismatch or a hybrid entity double deduction, or
  • the relevant mismatch is an excessive PE deduction

Condition F requires comparison with a counterfactual position, which assumes that Condition D is met and puts the UK payer (as identified in Condition B) in the position of payer, payee or investor in relation to the mismatch identified in Condition D.

A PE deduction is defined at s259KB(3) as an amount that

  • 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, and
  • may, in substance, be deducted from the company’s income when calculating the taxable profits of the company in the PE jurisdiction

S259KB(4) defines a PE deduction as excessive to the extent that the PE deduction exceeds the amount of any increase in profits or reduction in losses of the company for tax purposes in the parent jurisdiction that arises from the circumstances giving rise to the PE deduction.