HMRC amends existing corporation tax legislation to deal with transitional adjustments arising on the adoption of IFRS 9 in respect of credit losses
06 Aug, 2015
Amendments have been made to existing tax legislation, coming into force on 7 August 2015, to deal with the tax treatment of credit losses as a result of the introduction of IFRS 9 ‘Financial Instruments’. The changes will affect all companies that incur credit losses; especially those in the banking sector.
The amendments to the Change of Accounting Practice Regulations 2004 (SI 2004/3271) require all transitional adjustments arising on first-time adoption of IFRS 9 for credit losses to be spread over 10 years. They are effective for accounting periods commencing on or after 1 January 2015. IFRS 9 is effective for accounting periods beginning on or after 1 January 2018; it has not yet been endorsed for use in the EU.
A Tax Information and Impact Note (TIIN) which sets out guidance and the impacts of the amendments has been published by HMRC. This indicates that up to 15,000 business could be affected by the accounting change and those affected are expected to incur a “negligible” one off familiarisation cost on the change in the tax rules.
Click for:
- Tax Information and Impact Note (TIIN) (link to HMRC website).
- The amended regulations; The Loan Relationships and Derivative Contracts (Change of Accounting Practice) Amendment Regulations 2015 (link to Regulations).