FRS102 and tax

The aim for introducing these rules, set out in three sets of amending regulations, is to ease the impact of the accountancy changes that become mandatory for many companies from 1 January 2015.

 

For periods commencing 1 January 2015, many UK companies will be required to apply one of EU-endorsed IFRS, FRS 101 or FRS 102.

 

The draft Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2014 will amend the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account Profits and Losses) Regulations 2004 (the ‘Disregard Regulations’) which provide specific tax treatment for particular instruments especially in the context of hedging relationships.

 

The key change is to streamline the ability of companies to make an election, ie, to ‘elect-in’ to the computational rules, rather than being ‘elect-out’ as at present.

 

The draft regulations and accompanying documents, including the Tax Information and Impact Note (TIIN), are available at http://tinyurl.com/ntckaxc

 

The draft Loan Relationships and Derivative Contracts (Change of Accounting Practice) (Amendment) Regulations 2014 will amend the Loan Relationships and Derivative Contracts (Change of Accounting Practice) (Amendment) Regulations 2014 which provide detailed tax rules governing the tax treatment for loan relationship and derivative contracts on a change of accounting policy.

 

The main effect of the amendment is to preserve the existing treatment in cases where distressed debt is modified as part of a corporate rescue.

 

The draft regulations and accompanying documents, including the TIIN, are available at http://tinyurl.com/qetrm7d

 

Finally, the Changes in Accounting Standards (Loan Relationships and Derivative Contracts) Regulations 2014 will amend the Exchange Gains and Losses (Bringing into Account Gains and Losses) Regulations 2002  and the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account Profits and Losses) Regulations 2004 which provide specific tax treatment for particular instruments.

 

They make a new provision in respect of ‘permanent-as-equity’ loans to preserve the existing treatment of such loa