FB 2018-19: HMRC amends CIR rules to reflect IFRS 16 Leases standard
The government has published draft legislation requiring companies adopting IFRS 16 Leases to continue to classify leases as either financial or operating leases for the purposes of Corporate Interest Restriction (CIR) rules
6 Jul 2018
The draft legislation makes technical amendments to a number of parts of the tax legislation following the introduction of IFRS 16 Leases. This includes:
- Long funding lease rules;
- CIR rules; and
- other rules which make reference to finance leases, included the tax rules for hire purchase contracts, oil activities, Real Estate Investment Trusts (REITs), and the sale of lessors rules.
The measure also repeals section 53 of Finance Act (FA) 2011 which required businesses to prepare their tax calculations on the basis of the old accounting treatment.
These amendments are effective for accounting periods beginning on or after 1 January 2019.
Transitional adjustments recognised upon adoption of IFRS 16 will be spread with effect for periods of account beginning on or after 1 January 2019, including where the lessee adopted the standard for an earlier period.
These changes are not expected to have any effect on the Exchequer.
Businesses may incur one-off costs due to familiarisation with the new rules and changes to reporting systems and processes to comply with the CIR changes. Ongoing costs are expected to relate to classifying leases between operating and finance leases.
Report by Amy Austin