The government has announced a clamp-down on the decade-long use of ‘hybrid mismatches’, a technique commonly used by multinational companies to significantly reduce their tax bills.

It is the latest in a series of steps the government has taken to tackle aggressive tax planning and is expected to bring tens of millions of pounds per year of additional revenue into the Exchequer once implemented.

Hybrid mismatch arrangements exploit differences between countries’ tax rules to avoid paying tax in either country, or to obtain more tax relief against profits than they are entitled.

The UK has worked with G20 and OECD member countries as part of the BEPS project to agree a solution that prevents companies from taking advantage of this and proposals were endorsed by G20 Finance Ministers at their meeting in Cairns last month.

More information on the steps the government would like to take will be published when a consultation on the implementation of rules to prevent hybrid mismatches is included as part of the Autumn Statement on 3 December.

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