Taxes Consolidation Act 1997 section 835AB

Worldwide system of taxation

Section 835AB ensures that the anti-hybrid rules in Part 35C do not create artificial mismatch outcomes where a worldwide system of taxation already subjects the relevant income to tax, by treating certain "disregarded payments" as included for anti-hybrid purposes.

• Where an enterprise is taxable under a worldwide system of taxation, internal payments between head offices and branches, between branches, or between hybrid entities and their participators may be ignored ("disregarded") in computing taxable profits — these are "disregarded payments" for the purposes of this section.
• Where a disregarded payment would otherwise trigger a technical hybrid mismatch (because the income against which a deduction is taken appears not to be included in the other territory), the disregarded payment is treated as included in the investor or payee territory, so that no mismatch outcome arises.
• This treatment applies only where the deduction would be against dual inclusion income, or where the deduction would not result in a deduction-without-inclusion mismatch but for the fact that the corresponding income is a disregarded payment.
• A principle-based anti-avoidance override in subsection (3) prevents reliance on the section where there is, in substance, a genuine hybrid mismatch within the meaning of the EU Anti-Tax Avoidance Directive or the OECD BEPS Action 2 report.