UK hybrid and other mismatch rules: exemptions and relieving provisions for funds (relevant and transparent 10% rule), financial traders, QIIs, securitisations, regulatory capital, amortisation and permanent establishment transfers
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Practice notes
Hybrid and other mismatches
The UK’s rules on hybrid and other mismatches (termed in this Practice Note the hybrid rules) have been in force since 1 January 2017 and are intended to neutralise tax asymmetries arising from how a hybrid instrument or hybrid entity is treated for tax purposes. While they generally address cross‑border dealings spanning two or more jurisdictions, the hybrid rules can equally bite on wholly UK domestic arrangements. In particular, they focus on:
- deduction/non‑inclusion mismatches (D/NI mismatches), i.e. where a payment made under a hybrid mismatch arrangement is deductible in the payer’s jurisdiction for tax purposes but is not brought into the taxable income of the payee or a related party investor; and
- double deduction cases (DD cases), i.e. where a payment under a hybrid mismatch arrangement triggers more than one tax deduction
Separate chapters deal with the various categories of D/NI mismatches and DD cases. For further detail on the hybrid rules, see Practice Note: Hybrid mismatches—introduction to the rules. For a tabular overview of the conditions that must be met in each chapter before any counteraction can apply, see: UK rules counteracting hybrid mismatch arrangements—table. Subject to exemptions, the hybrid...
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Web page updated on 22/05/2026
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