The government has confirmed plans to clampdown on the use of hybrid mismatches as part of moves to tackle aggressive tax planning, and is to set out the proposals in the Autumn Statement in December
In its announcement, the Treasury described hybrid mismatches as ‘a technique commonly used by multinational companies to significantly reduce their tax bills’ over the past decade.
Cross-border hybrid mismatch arrangements produce multiple deductions for a single expense or a deduction in one jurisdiction with no corresponding taxation in the other jurisdiction.
It said its new rules, which will conform to the proposals published as part of the OECD’s Base Erosion and Profit Shifting (BEPS) project, are expected to bring tens of millions of pounds per year of additional revenue into the Exchequer once implemented.
The government will publish a consultation on the implementation of rules to prevent hybrid mismatches at the Autumn Statement on 3 December.
The Treasury said that the consultation will be looking at the case for special provisions for banks’ and insurers’ hybrid regulatory capital instruments, which is an area in which the OECD has allowed countries to make independent policy decisions.
The aim is to prevent these instruments from being used for tax avoidance purposes, while recognising banks’ and insurers’ regulatory requirements and ensuring that they are not disadvantaged relative to other sectors.
