The carbodiphosphorane-based iridium pincer complex (2) is demonstrated to rearrange in chlorinated organic solvents under cleavage of a P-C-bond to give a chelating phosphine ylide ligand. A detailed mechanistic investigation reveals that these types of donor groups are prone for P-C-bond cleavage in the coordination sphere of transition metal hydrido complexes. Finally, complex 2 is demonstrated to be an efficient hydrogen-borrowing catalyst.