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D4.706 Hybrid deduction/non-inclusion arrangement

These are the rules governing hybrid financial instruments, hybrid transfers and hybrid entity payers/payees. These four hybrid arrangements have rules that are very similar in scope and phraseology (with obvious modifications as necessary). The legislation sets out in detail what falls within the ambit of the rules, but essentially there will be a hybrid or other non-deduction/mismatch in relation to a financial instrument, transfer arrangement or hybrid payer/payee arrangement if the result of the transaction is that a deduction exceeds the corresponding income recognition. There are also detailed provisions setting out how the mismatch is to be calculated¹.

An arrangement will fall within these anti-hybrid rules if the following conditions are met²:

1. Ìý

   •ÌýÌýÌýÌý a payment is made in connection with a financial instrument³/hybrid transfer arrangement⁴/hybrid payer arrangement⁵/hybrid payee arrangement⁶

2. Ìý

   •ÌýÌýÌýÌý the payer/hybrid payer is within the charge to corporation tax for the payment period or the payee / investor in a hybrid payee is within the charge to corporation tax