Hybrids Legislation (ATAD2)


Hybrid mismatches are differences in the tax treatment of an entity or an instrument under the laws of two or more jurisdictions. The BEPS programme introduced measures to address tax advantages arising from these. If a mismatch happens, it is neutralised by disallowing a deduction or including the amount in assessable income depending on the situation.  The Anti-Tax Avoidance Directive II (ATAD2) is the EU legislation on hybrid mismatches between the EU and third countries which aims to combat aggressive tax planning used by enterprises to avoid tax liabilities. 

Current work:


The UK was one of the first countries to adopt BEPS anti-hybrid measures, which contained provisions which exceeded what should have been applied. In the current  UK Finance Bill, HM Treasury has introduced legislative changes to the UK Hybrids and other Mismatches regime, following a previous consultation on this matter to which AIMA and the ACC submitted a response.  Key amendments to the existing regime may be reviewed here.  

We welcome the initiative of the Government to address the limitations of the existing regime and support the amendments which have been proposed in this context. The ACC and AIMA provided comments on the remaining areas of concern for our members. Members can review the full response here.


Ireland and Luxembourg have introduced measures applying ATAD2 which generally take account of the position of funds and fund structures established there.

Upcoming actions:

The UK measures are expected to become law in the Finance Act.

(Last updated: 29 June 2021)