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. 

  1. INTM551200
    Interest payment - debt/equity hybrid
  2. INTM551210
    Interest payment - partial exemption
  3. INTM551220
    Interest payment – payee is under-taxed
  4. INTM551230
    Interest payment under a hybrid financial instrument – payee has no tax jurisdiction
  5. INTM551240
    Interest payment – payee in territorial tax regime
  6. INTM551250
    Interest payment – debt re-characterised as equity
  7. INTM551260
    Interest free loan – deemed discount
  8. INTM551270
    Interest-free loan - deemed interest
  9. INTM551280
    Convertible note - valuation of discount
  10. INTM551290
    Payment to modify a debt instrument
  11. INTM551300
    Release of debt obligation
  12. INTM551310
    Interest payment with underlying foreign tax credit
  13. INTM551320
    Interest payment to a charity
  14. INTM551330
    Interest payment to a person holding instrument through tax exempt accounts (e.g. ISAs)
  15. INTM551340
    Foreign exchange differences on a debt instrument
  16. INTM551350
    Payment for cancellation of a financial instrument
  17. INTM551360
    Consideration for the purchase of a trading asset
  18. INTM551370
    Interest component of the purchase price of shares
  19. INTM551380
    Interest paid on the purchase of shares from a share trader