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D4.740 Introduction to tax arbitrage

The provisions in this article were repealed from 1 January 2017. From 1 January 2017, the rules dealing with hybrid and other mismatches apply; see D4.701 onwards. The latter rules were introduced as part of the OECD BEPS action plan on international corporate tax avoidance.

Anti-avoidance legislation¹ aims to deter the use of hybrid entities or instruments (known as tax arbitrage) by companies seeking to exploit differences between or within national tax codes. The legislation operates by reducing or disallowing deductions or by bringing receipts into charge, but applies only where HMRC issue a notice to the company (see below and D4.742, D4.743). Separate provisions apply in relation to deductions cases and receipts cases.

In broad terms, the legislation applies to deductions and receipts arising or accruing on or after 16 March 2005². Further details