INTM558010 - Hybrids: dual territory double deduction (Chapter 10): overview

Chapter 10 of Part 6A TIOPA 2010 counters double deduction mismatches arising to either

  • a dual resident company, or
  • a company with a permanent establishment (a ‘relevant multinational company’)

For Chapter 10 to apply, both Condition A and Condition B in s259JA must be met

Condition A

A company is a

  • dual resident company, or
  • relevant multinational company

Condition B

There is an amount that, in the absence of Chapter 10 and any equivalent overseas rules, it is reasonable to suppose could be deducted from both the company’s income for corporation tax purposes, and from its income for the purposes of a tax charged by an overseas territory, by reason of the company being a dual resident company or relevant multinational company. This double deduction is the dual territory double deduction amount.

Where both these conditions are met, the counteractions are broadly as follows

  • For a dual resident company, the dual territory double deduction amount may be deducted only from dual inclusion income for the period, with any excess being carried forward for future periods. The amount of the dual territory double deduction allowed is also restricted by the amount of any illegitimate overseas deduction.
  • For a relevant multinational where the UK is the parent jurisdiction, the dual territory double deduction amount may be deducted only to the extent that it is not an impermissible overseas deduction.

For a relevant multinational where the UK is the PE jurisdiction, and there is no counteraction of the deduction under the law of the parent jurisdiction, the dual territory double deduction amount may be deducted only from dual inclusion income for that period, with any excess being carried forward to future periods. The amount of the dual territory double deduction allowed is also restricted by the amount of any illegitimate overseas deduction.