The government has announced that it will be undertaking a consultation on aspects of the hybrid mismatch rules.
The rules, which have been in effect since 1 January 2017, counteract arrangements with a hybrid element where that hybridity leads to a tax mismatch. The rules are complex and operate mechanically. The rules can lead to some unexpected outcomes and can have a disproportionate impact on certain sectors such as the funds sector. For example, the rules can disallow a payment even where that payment flows to a tax exempt investor such as a pension fund.
Companies that are subject to the hybrid mismatch rules.
It is expected that the consultation will be launched later this month.
We welcome the announcement of a consultation which will hopefully ensure that certain aspects of the rules are amended to make them more proportionate and operate as intended.