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What is a ‘hybrid’ security?

It should be noted that the word ‘hybrid’ is used in this section of the Corporate Finance Manual, as it often is in commercial parlance, as a shorthand way of describing convertible, exchangeable, asset-linked and similar securities, for which there is a special tax treatment within the loan relationships and derivative contracts rules.

The legislation, at CTA09/S415 and S585 does not refer to hybrid securities, but rather to ‘loan relationships with embedded derivatives’. This chapter also covers situations where a company has a compound financial instrument which contains both liability and equity components.

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