INTM550060 - Hybrids: introduction: overview of legislation

The hybrids legislation is at Part 6A of the Taxation (International and Other Provisions) Act 2010 (TIOPA 10).

Part 6A potentially applies to deduction/non-inclusion mismatches and double deduction mismatches involving

• payments or quasi-payments in connection with financial instruments
• hybrid transfers
• hybrid entities
• companies with permanent establishments
• dual resident companies

The legislation targets specific types of mismatches, setting out the conditions to be satisfied in each instance, and what adjustments are to be made for corporation tax purposes to counteract the mismatch.

If the conditions applicable to a particular type of mismatch are satisfied, the mismatch is counteracted by disallowing or limiting the use of the deduction claimed or bringing an amount of income representing the mismatch amount within the charge to tax in the UK.

Part 6A contains 14 chapters

• Chapter 1 is an overview
• Chapters 2 and 14 contain definitions and interpretations of key terms used throughout the legislation
• Chapters 3 to 10 each target a specific type of hybrid or other mismatch
• Chapter 11 counteracts imported mismatches in connection with payments or quasi-payments where the payer is within the charge to corporation tax
• Chapter 12 contains provisions to make adjustments in certain circumstances where new information shows that counteraction of a mismatch was excessive. Chapter 12A contains rules for the allocation of dual inclusion income within a group
• Chapter 13 contains an anti-avoidance provision
• Chapter 13A contains special provision concerning transparent funds