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HMRC consults on changes to lease taxation as a result of IFRS 16

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12 Aug 2016

HM Revenue and Customs (HMRC) has published a consultation on the impact of International Financial Reporting Standard (IFRS) 16 ‘Leases’ on the taxation of leases of plant or machinery and possible options to address those impacts.

Changes to the existing tax rules for the leasing of plant or machinery are required in order to cater for the new accounting requirements for leases under IFRS 16.  The changes will affect both IFRS and Financial Reporting Standard (FRS) 101 Reduced Disclosure Framework reporters.  They will not affect the rules for companies accounting under UK GAAP (except FRS 101).

The consultation covers:

  • current lease accounting rules and current tax treatment of plant and machinery leases;
  • new lease accounting under IFRS 16 and tax impacts; and
  •  options for tax changes.

The consultation offers a number of solutions including preserving the effects of the current regime or introducing a new tax regime for the tax treatment of leases of plant or machinery. 

Comments are invited until 30 October 2016.  After considering all responses to the options in the consultation, HMRC will issue another consultation on the preferred option.

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