Article six in our series on the new hybrid rules looks at how they apply to situations involving private equity funding.
Our series of articles looking at the practical implications of the anti-hybrid and other mismatch rules continues this week with a look at how the rules apply to a situation involving private equity funding. Following the introduction of these rules on 1 January 2017, if a UK company has borrowed from an overseas group company, the whole funding chain should be checked to ensure that there is no mismatch, otherwise the anti-hybrid rules might apply to either deny or defer a deduction in the UK. Similar rules apply where the UK company is paying for goods or services provided by overseas group companies. The example below illustrates how the rules can apply where there is a mismatch in the chain of transactions outside the UK, whether in the form of financing or payments for goods/services, which can result in a disallowance in the UK.
Why does this matter?
Businesses should act now to ensure that they fully understand the tax treatment of their global transactions, and to establish what the impact of the new rules on them may be. If you have any questions, then please get in touch with your usual KPMG contact or one of the named contacts below.
This article is the sixth in a series on the application of the UK’s new hybrid and other mismatch rules. The previous articles in this series cover the following:
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