Help with imported hybrid mismatches — GfC16
Find out about imported hybrid mismatches and how to lower compliance risk and avoid common mistakes.
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Why this matters to you
These guidelines affects you where your UK business is both:
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part of a multinational group and makes payments to overseas entities — especially if those payments are deductible for UK tax purposes
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if those payments are linked to arrangements that create tax mismatches elsewhere in the group, you could be importing a hybrid mismatch into the UK
An example of an imported hybrid mismatch is where:
- a UK company pays interest to a group finance company outside the UK
- that company treats the interest as a taxable receipt but also pays interest to a group company in a third country
- the interest income is not taxable because the group company is treated as transparent for tax purposes in the third country jurisdiction
The result:
- the interest might be deductible in the UK but another interest payment is not taxed elsewhere in the group — creating a mismatch
- if the UK interest payment is part of a wider series of arrangements that includes that other interest payment, it could trigger the UK’s imported hybrid mismatch rules
These guidelines are here to help you identify situations like this early, understand HMRC expectation, and reduce your compliance risk. They guide you through:
- what imported hybrid mismatches are and how they arise
- how to analyse your group’s arrangements and identify risk
- what evidence HMRC expects you to retain
- how to disclose counteractions correctly in your tax return
- what to do if you discover an error
These guidelines are designed to support you in making informed, low-risk decisions, whether you’re either:
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a tax specialist preparing the analysis
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a UK risk lead reviewing the return
They reflect HMRC experience from real-world enquiries and disclosures and include best practice recommendations to help you stay ahead of potential issues.