On December 9, 2015 we already reported on the policy paper titled: “Corporation Tax: anti-hybrid rules” that was published by the UK HM Revenue & Customs (HMRC) (read our article here). When publishing the policy paper the HMRC already announced that on December 22, 2015 it would publish a series of examples illustrating the application of the hybrid mismatch rules. And so it did.
On December 22, 2015 the HMRC published a document titled: “Draft Examples - Clause 33: Hybrid and other mismatches”. The document contains 20 examples that are ordered based on the subject they relate to.
The following examples are discussed:
· Hybrid and other mismatches from financial instruments
o Interest payment under a debt/equity hybrid
o Interest payment under a debt/equity hybrid eligible for partial exemption
o Interest payment under a debt/equity hybrid that is subject to a reduced rate
o Interest payment to a person established in a no-tax jurisdiction
o Interest payment to a taxpayer resident in a territorial tax regime
o Debt issued in proportion to shares recharacterised as equity
o Accrual of deemed discount on interest free loan
o Deemed interest on interest-free loan
o Differences in valuation of discount on issue of optional convertible note
o Payment in consideration for an agreement to modify the terms of a debt instrument
o Release from a debt obligation not a payment
· Hybrid transfer deduction/non-inclusion mismatches
o Repo transaction creating an insubstance borrowing
· Hybrid payer deduction/non-inclusion mismatches
o Disregarded hybrid payment structure using disregarded entity and a hybrid loan
o Interest payable by a hybrid payer
· Hybrid payee deduction/non-inclusion mismatches
o Application of Recommendation 4 to payments that are partially excluded from income
o Recommendation 4 and payments that are included under a CFC regime
· Hybrid entity double deduction mismatches
o Whether a double deduction DD may be set off against dual inclusion income
o Double deduction outcome from the grant of share options
· Dual resident company double deduction cases
o DD outcome using a dual resident entity
· Imported mismatches
o Structured imported mismatch rule
Click here to be forwarded to “Draft Examples - Clause 33: Hybrid and other mismatches” as available on the website of the UK Government, which will open in a new window.
Copyright – internationaltaxplaza.info
Are you looking for a motivated tax colleague? Then place your job ad on International Tax Plaza!
and
Stay informed: Subscribe to International Tax Plaza’s Newsletter! It’s completely FREE OF CHARGE!
