Hybrid and other mismatches
Produced in partnership with Dominic Robertson of Slaughter and May
Hybrid and other mismatches

The following Tax practice note produced in partnership with Dominic Robertson of Slaughter and May provides comprehensive and up to date legal information covering:

  • Hybrid and other mismatches
  • Structure of this Practice Note
  • Legislation and guidance
  • Summary of legislative changes to the hybrid rules
  • Clearances from HMRC
  • Commencement
  • Interaction between hybrid rules and other UK tax rules
  • Priority between UK hybrid rules
  • Chapter 3: Hybrid mismatches from financial instruments
  • Condition A
  • More...

Hybrid and other mismatches

STOP PRESS: In response to a consultation on changes to the hybrid mismatch rules that closed on 29 August 2020, Finance Act 2021 makes various amendments to the hybrid rules, some of which take effect retrospectively from 1 January 2017. For more information, see the ‘Legislation and guidance’ section below and News Analyses: Further provisions for draft Finance Bill 2021—tax analysis—Finance, HMRC response to hybrid mismatch rules consultation—close, but no cigar and Publication of Finance Bill 2021.

This Practice Note outlines the UK rules (referred to in this Practice Note as the hybrid rules) that counteract, for corporation tax purposes, hybrid and other mismatches. These mismatches ‘exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions to achieve double non-taxation, including long-term deferral’. Although the hybrid rules are stated to be based on the recommendations of the Organisation for Economic Cooperation and Development (OECD)/G20’s Final Report on BEPS Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements that was published on 5 October 2015 and the OECD’s Report on BEPS Action 2: Neutralising the Effects of Branch Mismatch Arrangements that was published on 27 July 2017 (together, these reports are referred to in this Practice Note as the Action 2 recommendations), HMRC’s guidance at INTM550020 also expressly states that the UK hybrids

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