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

Denial of the relevant deduction in relation to the imported mismatch payment

Section 259KC sets out how the tax deduction available to the UK payer (P) is reduced when an imported mismatch arises, including how the reduction is shared when other payments also contribute to the mismatch.

• Where P's imported mismatch payment is the only payment funding the mismatch, P's deduction is reduced by the full amount of the relevant mismatch.
• Where other relevant payments also fund the mismatch, the reduction is limited to P's share, apportioned on a just and reasonable basis according to how much each payment contributes to funding the underlying mismatch.
• Unless P can prove that the mismatch payment or transfer is funded by other relevant payments rather than by P's own imported mismatch payment, P is treated as funding the mismatch in full.
• Any reduction is subject to further adjustments for deductions against dual inclusion income (section 259KD) and an overall cap on the amount of the reduction (section 259KE).

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