Taxation (International and Other Provisions) Act 2010 section 259JB

Counteraction where mismatch arises because of a dual resident company

Section 259JB sets out how HMRC counteracts dual territory double deduction mismatches that arise because a company is dual resident — that is, resident for tax purposes in both the UK and another territory.

• A dual territory double deduction amount may only be deducted against the company's dual inclusion income (income taxed in both the UK and the overseas territory) for that period, with any excess carried forward to future periods.
• If the company ceases to be dual resident and HMRC is satisfied of this, any remaining unrelieved amount (the "stranded deduction") may instead be deducted in calculating the company's taxable total profits for the period in which dual residence ends, with any further excess carried forward.
• If it is reasonable to suppose that all or part of the double deduction amount has been deducted overseas against income that is not the company's dual inclusion income, that amount (the "illegitimate overseas deduction") is treated as already used, reducing the amount available for UK relief.
• Dual inclusion income is defined as income that is ordinary income of the company for both UK corporation tax purposes and for the purposes of a tax charged in the overseas territory, provided the overseas taxable period falls within specified time limits or a claim is made and accepted.