Part 6Tax arbitrage
Deduction schemes
236Schemes involving hybrid entities
1
A scheme is a deduction scheme if a party to a transaction forming part of the scheme meets conditions A and B.
2
Condition A is that the party is regarded as being a person under the tax law of any territory.
3
Condition B is that the party’s profits or gains are treated, for the purposes of a relevant tax imposed under the law of any territory, as the profits or gains of a person or persons other than the person mentioned in condition A.
4
Condition B is not met just because the party’s profits or gains are subject to a rule that—
a
is similar to that in section 747(3) of ICTA (imputation of chargeable profits of controlled foreign company), and
b
has effect under the tax law of any territory outside the United Kingdom.
5
For the purposes of this section, the following are relevant taxes—
a
income tax,
b
corporation tax, and
c
any tax of a similar character to income tax or corporation tax that is imposed by the law of a territory outside the United Kingdom.