INTM561710 - Hybrids: operational guidance: when does the legislation take effect

Part 6A of the Taxation (International and Other Provisions) Act 2010 was introduced by section 66/Schedule 10 of Finance Act 2016 (FA 16) and has effect from 1 January 2017. The commencement provisions for chapters 3 to 11 are set out at paragraphs 18 to 22 of Schedule 10, FA 16.

Broadly speaking, the legislation applies from 1 January 2017 for

• deduction/non-inclusion mismatches arising from deductions made on or after that date
• deduction/non-inclusion mismatches arising from quasi-payments in a payment period beginning on or after that date
• double deduction mismatches for accounting periods beginning on or after that date
• imported mismatch payments arising from payments made on or after that date
• imported mismatch payments arising from quasi-payments in a payment period beginning on or after that date

There are transitional rules for payment periods and accounting periods that begin before 1 January 2017 and end after that date at paragraphs 23 and 24 of Schedule 10, FA 16.

In these cases, the payment/accounting period is treated as 2 separate taxable periods

• one ending on 31 December 2016, and
• the other beginning on 1 January 2017

Apportion amounts to each of these period is on a time basis, unless that produces a result that is unjust or unreasonable. In those circumstances, apportion the amounts on a just and reasonable basis.

Transactions between 16 March 2005 to 31 December 2016 involving hybrids and mismatches fall within the arbitrage rules set out at INTM590000 onwards.