We have significant experience advising on the UK’s anti-hybrid rules.
The aim of the rules is to provide parity and eliminate instances of tax arbitrage in international corporate tax structures (e.g. eliminating double deductions, or deductions with no corresponding income pick up in cross border structures).
The UK anti-hybrid rules are extremely complex and broadly seek to disallow UK corporate tax deductions for costs in structures that have either a ‘hybrid instrument’ or a ‘hybrid entity’.
Large multinational groups with UK parents or subsidiaries in more than one tax jurisdiction can often fall under the anti-hybrid rules. This may be because of a mismatch in the tax treatment between the two countries.
The ability for US groups to make elections for their UK subsidiaries to be treated as flow-through entities can result in them becoming hybrid entities.
We are familiar with these issues and are ideally positioned to analyse supply chains and identify potential mismatches to ensure your business remains compliant.