March 21st, 2017 / Insight posted in Practical Guides

Hybrids and other mismatches from financial instruments

As part of the United Kingdom’s ongoing commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) initiatives, new legislation was enacted in the Finance Act 2016 containing provisions to remove tax mismatches arising from the use of hybrid financial instrument and hybrid entities. Broadly, a tax mismatch arises where a double deduction is being claimed for the same expense (the double-deduction outcome) or a deduction is being claimed for an expense without the corresponding receipt being fully taxed (the deduction/ non-inclusion outcome).