INTM555070 | Hybrids: hybrid payee (Chapter 7): conditions to be satisfied: condition E

Condition E is satisfied where one of the following applies

• the payer is also a hybrid payee (for a quasi-payment only),

• the payer and a hybrid payee, or an investor in a hybrid payee, are in the same control group at any time from when the arrangement is made to the last day of the payment period, or

• the arrangement is a structured arrangement

A payer may also be a hybrid payee in respect of a quasi-payment only where the UK is not the payer jurisdiction, and the hybrid payee

• is an entity that is not a separate person from the payer under UK tax law, and

• is an entity that is a separate person from the payer for tax purposes in the payer’s jurisdiction, and

• it would be reasonable to expect that entity to have an amount of ordinary income arising as a result of the circumstances giving rise to the quasi-payment

Control groups are defined at s259NB, and more detailed guidance on control groups is at INTM550610.

An arrangement is a structured arrangement if it is reasonable to suppose that

• it is designed to secure a hybrid payee deduction/non-inclusion mismatch, or

• the terms of the arrangement share the economic benefit of the mismatch between the parties to that arrangement, or otherwise reflect an expected mismatch

An arrangement designed to secure a commercial or other objective may also be designed to secure a hybrid payee deduction/non-inclusion mismatch. When considering this issue, the test is whether it is reasonable to suppose that the arrangement was designed to secure the mismatch, regardless of any other objective.