INTM557080 - Hybrids: hybrid entity double deduction mismatches (Chapter 9): stranded deductions

Where the investor is within the charge to corporation tax

If the Commissioners for HMRC are satisfied that no future dual inclusion income will arise to the investor, then the stranded deduction may be deducted in calculating the investor’s taxable total profits of the relevant period. A stranded deduction is the amount of the hybrid entity double deduction that has not been deducted from dual inclusion income in an earlier accounting period.

If a stranded deduction cannot be used against the total profits of the investor in the relevant period, it may be carried forward and set against total profits of future periods.

Where the hybrid entity is within the charge to corporation tax

If the Commissioners for HMRC are satisfied that no future dual inclusion income will arise to the hybrid entity, then the stranded deduction may be deducted in calculating the hybrid entity’s total profits of the relevant period. A stranded deduction is the amount of any hybrid entity double deduction that has not been deducted from dual inclusion income in an earlier accounting period.

If a stranded deduction cannot be used against the total profits of the hybrid entity in the relevant period, it may be carried forward and set against total profits of future periods.

Commissioners Consideration

Stranded deductions are likely to arise in scenarios where an entity ceases permanently, that is is struck off such that there is no future prospect of dual inclusion income arising. Where stranded deductions are to be considered by the Commissioners full details should be sent to the Base Protection Policy team, BAI

By email to [email protected], or

By post to

HM Revenue & Customs
Base Protection Policy Team
Business Assets & International
S0862
Floor 4 Rear
Central Mail Unit
Newcastle
NE98 1ZZ