UK: Consultation on BEPS hybrid mismatch arrangement announced

UK: BEPS hybrid mismatch arrangement announced

The UK government on 5 October 2014—following the OECD’s release of the first seven BEPS* deliverables, including draft recommendations on BEPS Act 2, Neutralising the effects of hybrid mismatch arrangements—reaffirmed its commitment to these recommendations and announced plans for a consultation for implementation of the BEPS action items as part of the Autumn Statement (scheduled for 3 December 2014).

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*BEPS = the OECD’s base erosion and profit shifting project

As well as proposing changes to the model tax convention, the OECD recommended changes to domestic rules to neutralise the effects of various hybrid mismatch arrangements. Although guidance on implementation and co-ordination of new rules is expected after September 2015, the OECD stated that the BEPS Action 2 recommendations contain sufficient detail to allow governments to act on it immediately if they wish.

The OECD report indicates that there needs to be further work in certain areas, including hybrid regulatory capital instruments. The UK government announcement highlights this as an area for which special rules may be needed to recognise the unique regulatory obligations and to determine they are not unfairly disadvantaged.

However, there is no mention in the UK government announcement of other outstanding areas listed by the OECD—such as repo transactions or the interaction with controlled foreign company (CFC) rules.


Read an October 2014 report [PDF 3.07 MB] prepared by the KPMG member firm in the UK:Weekly Tax Matters (10 October 2014)

Other items discussed in this KPMG report include:

  • Taxation in Scotland - devolved tax rates announced
  • Indirect and VAT updates
  • Repeal of the 55% pension death benefit tax
  • Employment tax items

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