INTM551180 - Hybrids: financial instruments (Chapter 3): examples

General comment

Several of the following examples correspond to examples included in the Final Report on Neutralising the Effects of Hybrid Mismatch Arrangements published by the Organisation for Economic Cooperation and Development (OECD) on 5 October 2015. These illustrate scenarios that could include a mismatch where a financial instrument issued by a company in one tax jurisdiction is held by a company in another, but which might not necessarily give rise to a mismatch where one of the jurisdictions is the UK.

Nevertheless, these examples are included to demonstrate the principles underlying the relevant parts of the hybrid and other mismatch legislation.

Additional examples reflecting more common commercial use of financial instruments in the UK may be considered for inclusion in later versions of this guidance.

INTM551200 - Example: Interest payment - debt/equity hybrid

INTM551210 - Example: Interest payment - partial exemption

INTM551220 - Example: Interest payment – payee is under-taxed

INTM551230 - Example: Interest payment – payee has no tax jurisdiction

INTM551240 - Example: Interest payment – payee in territorial tax regime

INTM551250 - Example: Interest payment – debt re-characterised as equity

INTM551260 - Example: Interest free loan – deemed discount

INTM551270 - Example: Interest-free loan – deemed interest

INTM551280 - Example: Convertible note – valuation of discount

INTM551290 - Example: Payment to modify debt instrument

INTM551300 - Example: Release of debt obligation

INTM551310 - Example: Interest payment with underlying foreign tax credit