Practitioner view: Hybrid and other mismatch rules

Matthew Mortimer

The UK’s anti-hybrid rules should not really apply to ordinary arm’s length borrowings between independent persons even if they do create relevant hybrid mismatches for example a deduction for the borrower but a non-inclusion of income for the lender. This is principally because assuming the relevant arrangements are not designed or otherwise ‘structured’ to generate those mismatches as would usually be the case borrower and lender must generally be ‘related’ to each other or depending upon the relevant provision in the same ‘control group’ for the legislation to apply (see for example TIOPA 2010 s 259CA(6)(b) and s 259GA(7)(b)).

However borrower and lender need not be connected in this way for the double deduction rules in TIOPA 2010 Part 6A Chapter 9 to apply. For example a UK borrower company might be disregarded for applicable US tax purposes...

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