Taxation (International and Other Provisions) Act 2010 section 259CA

Circumstances in which the Chapter applies

Section 259CA sets out the four conditions (A to D) that must all be met for the hybrid mismatch rules on financial instruments to apply.

• A payment or quasi-payment must be made under or in connection with a financial instrument, and either the payer or a payee must be within the charge to UK corporation tax for the relevant period.
• It must be reasonable to suppose that, ignoring these anti-hybrid rules and any equivalent overseas provisions, a hybrid or otherwise impermissible deduction/non-inclusion mismatch would arise.
• There must be a qualifying relationship between the parties: the payer is also a payee (in the case of a quasi-payment), the payer and payee are related at any point from the date any arrangement was made in connection with the instrument until the end of the payment period, or the instrument or a connected arrangement is a structured arrangement.
• A financial instrument or connected arrangement is a structured arrangement if it is designed to produce the mismatch or if its terms share the economic benefit of the mismatch between the parties, even if the arrangement also has a genuine commercial purpose.