D4.725 Imported mismatches

Corporate tax
Corporate tax | Commentary

D4.725 Imported mismatches

Corporate tax | Commentary

Hybrid and other mismatches—anti-avoidance

D4.725 Imported mismatches

There are further provisions that apply to restrict deductions in the UK even when there is no direct hybrid arrangement in the UK. The rules provide that relief can be restricted where the hybrid arrangement is part of a series of arrangements which gives rise to a deductible payment (or accrual) in the UK and which also involve a mismatch arrangement not currently (or, from 10 June 2021, capable of being) counteracted by the other jurisdictions involved. These provisions are much more wide ranging than the previous anti-arbitrage rules (D4.740 onwards) and it will be necessary to look at the wider transaction and understand the tax treatment of any corresponding receipt.

The qualifying conditions which must all be met for these rules to apply are1:


    •     a payment or quasi-payment (the imported mismatch payment) is made under/in connection with an arrangement (the imported mismatch arrangement) by a payer (P) who is within the charge to corporation tax and the imported mismatch arrangement is one of a series of arrangements entered into in pursuance of, or in relation to, an over-arching arrangement


    •     under a different arrangement in the series (the relevant mismatch), there is a payment or quasi-payment which it is reasonable to suppose gives rise to any of the mismatches defined at D4.705–D4.723 or as a consequence of such arrangement there will be an excessive PE deduction


    •     in relation to payments made on or after 10 June 2021, it is

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