In 2014, the UK government announced the implementation of one of the OCED’s recommendations in the form of the anti-hybrid rules. The anti-hybrid rules seek to remove tax mismatches which can arise between two or more companies where the tax treatment of a particular financial instrument or entity differs in the jurisdictions in question resulting in either; (i) a tax deduction in both companies, or (ii) a tax deduction in one company with no corresponding charge in the other. Draft legislation for the anti-hybrid rules is included in the Finance Bill 2016
Today the Chancellor announced an extension to these already far-reaching rules to also cover mismatches which arise from permanent establishments.
The rules will come into effect from 1 January 2017 and it is anticipated they will result in an additional £950m of tax for the Treasury over the next 5 years, which indicates the extent to which the government considers mismatches are taken advantage of.
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