INTM552010 | Hybrids: hybrid transfers (Chapter 4): overview

Chapter 4 of Part 6A TIOPA 2010 counters deduction/non-inclusion mismatches that arise from payments or quasi-payments (see INTM550540) involving hybrid transfers. A hybrid transfer arrangement is an arrangement for the transfer of a financial instrument. The definition of a hybrid transfer arrangement specifically includes repos and stock lending arrangements.

Conditions to be satisfied

Chapter 4 applies where the five conditions (A to E) set out in s259DA are met. These conditions are

Condition A

Is there a hybrid transfer arrangement in relation to an underlying instrument?

Condition B

Is a payment or quasi-payment made under or in connection with either the hybrid transfer arrangement or the underlying instrument?

Condition C

Is either the payer or one of the payees within the charge to UK corporation tax?

Condition D

Is it reasonable to suppose that there would be a hybrid transfer deduction/non-inclusion mismatch if it were not countered by this legislation or equivalent legislation outside the UK?

Condition E

Are the relevant counterparties related, or is the hybrid transfer arrangement a structured arrangement?

Counteraction

If all five conditions are met, then the hybrid transfer deduction/non-inclusion mismatch is counteracted by altering the corporation tax treatment of either the UK payer or UK payee.