UK hybrid mismatch rules: defining payments and quasi-payments, payer/payee and jurisdictions, payment periods, assumptions, deemed deduction exception, and HMRC guidance
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Practice notes
The UK’s rules on hybrid and other mismatches
Known in this Practice Note as the hybrid rules, the UK’s regime has been in force since 1 January 2017 and is intended to neutralise tax mismatches arising from the tax treatment of a hybrid instrument or hybrid entity. Although the hybrid rules are generally engaged in cross-border dealings involving two or more jurisdictions, they can also extend to arrangements that are entirely UK domestic.
Specifically, the rules target:
- deduction/non-inclusion mismatches (D/NI mismatches), ie where a payment under a hybrid mismatch arrangement is deductible in the payer jurisdiction for tax purposes but is not brought into the taxable income of a payee or a related party investor, and
- double deduction cases (DD cases), ie where a payment under a hybrid mismatch arrangement produces more than one tax deduction
For further information on the hybrid rules, see Practice Note: Hybrid mismatches—introduction to the rules. For an at-a-glance table of the conditions required by each chapter before any counteraction can apply, see: UK rules counteracting hybrid mismatch arrangements—table. Subject to exemptions, the hybrid rules seek to counteract these mismatches by denying the tax deduction or treating the receipt...
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Web page updated on 22/05/2026
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