UK anti-hybrid rules

28 February 2017

The UK’s complex new regime for counteracting hybrid and other mismatches came into force on 1 January 2017. It presents some challenges for corporate groups and a limited opportunity for improvements.

Most groups are likely to have some sense of what these rules are about, although our experience suggests that some taxpayers, and also HMRC, are just waking up to some of the more surprising implications of the UK’s attempt to implement the recommendations of the OECD on BEPS Action 2.

In practice, published guidance is likely to be central to the operation of these rules for both groups and HMRC.  The consultation on HMRC’s draft guidance is open until 10 March 2017 – and groups would be well-advised to raise now the impact that the anti-hybrids legislation may have on their arrangements, especially where the rules give rise to unexpected difficulties.