Taxes Consolidation Act 1997 section 835AH

Interpretation (Chapter 4)

Section 835AH defines key terms used in the anti-hybrid mismatch rules as they apply to financial instruments, and sets out the conditions under which a corresponding amount relating to a payment under a financial instrument is not regarded as "included" in the payee territory.

• "Financial instrument" is broadly defined to cover securities, shares, derivatives, arrangements equivalent to lending at interest, and hybrid transfers.
• A "hybrid transfer" arises where a financial instrument is transferred under an arrangement and the underlying return is treated for tax purposes as derived by more than one party.
• "Financing return" includes dividends, manufactured payments, interest (including amounts treated as interest under the Islamic financing rules), and the underlying return on a hybrid transfer.
• A corresponding amount is not treated as "included" if the payee territory reduces the taxable amount by reference to how the payment is characterised, or unless it falls within the required timing and arm's length conditions.