MHA | UK Hybrid Mismatch Rules - new disclosures required

UK Hybrid Mismatch Rules - new disclosures required

Posted on: October 13th 2022 · read

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Effective from 6 April 2022 onwards, HMRC have amended the corporation tax return (CT600) to include new disclosure requirements in respect of the UK anti-hybrid rules. The amendments have been made to supplementary form CT600B, which previously only dealt with disclosures in respect of the controlled foreign company rules.

New corporation tax return disclosures - CT600B

There are ten additional disclosures required on box 840 - 885 of the CT600. Companies will be required to disclose whether:

  1. The company is a hybrid entity
  2. There were any transactions with hybrid entities in the same control group as this company
  3. There were any hybrid or otherwise impermissible deduction/non-inclusion mismatches in connection with a financial instrument
  4. There was an excessive permanent establishment (PE) deduction
  5. There has been a multinational payee deduction/non-inclusion mismatch
  6. There has been a counteraction under Part 6A Taxation (International and Other Provisions) Act 2010 (TIOPA 2010).

The other four additional disclosures are linked to the above and require further details to be provided, if the response to any of the six above disclosures applies.

Why has this been introduced?

Historically, it has been difficult for HMRC to identify multi-national groups that should be caught by the UK’s anti-hybrid legislation, where no disclosure has been made in any UK tax returns.

The introduction of these new reporting requirements is expected to give HMRC more visibility over situations where the rules may be in point. Furthermore, companies who are caught by the rules but have concluded that no counteraction should apply may find themselves susceptible to a HMRC compliance check and, in certain cases, discovery assessments in respect of earlier periods. For example, those who are deemed hybrid entities but suffer no counteraction due to sufficient dual inclusion income (income that is brought within the charge to tax in more than one jurisdiction), or those who have not taken sufficient steps to conclude on the position.

Companies particularly at risk

Whilst the hybrid legislation is widely drawn to catch various scenarios where a tax advantage may be obtained from a hybrid mismatch arrangement, those commonly caught by the rules include:

  • UK companies of US parented groups which are transparent from a US federal income tax perspective, as a result of a ‘check-the-box’ election having been made
  • UK companies making payments to hybrid entities, such as a US LLC classified as a partnership (typically the case where an LLC has two or more members), or disregarded for US federal income tax purposes (typically the case when they have one owner). In contrast, the UK should be expected to view the LLC as opaque (subject to certain narrow case law fact pattern exceptions - see Anson v HMRC)
  • UK companies with foreign permanent establishments
  • Foreign companies with UK permanent establishments.


EWe recommend, as a minimum, that groups with both a UK and non-UK presence should consider these new disclosure requirements before filing their UK corporate income tax returns. Those groups particularly at risk (i.e. those in one of the above four scenarios) should benefit from a third-party review of the hybrids position well in advance of the relevant filing deadline, to understand whether a more detailed review is necessary to reach a defensible filing position.

For further guidance on how this topic affect your business, speak to one of our experts

Please contact us if you need further information or assistance is required in respect of these new reporting requirements by using our online form.

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