Leasing – HMRC Consultation Announced

Leasing – HMRC Consultation Announced

Wed 08 Mar 2017

A major change in accounting standards is due to take effect from 1 January 2019, with the introduction of IFRS16, which is the new accounting standard on leasing. Broadly, the new standard will result in a significantly different treatment for the vast majority of leasing arrangements previously treated as operating leases. It is anticipated that a far greater proportion of these contractual arrangements will now be brought “on-balance sheet” for entities which are parties to such arrangements.

The tax treatment of leases, particularly for certain types of plant and machinery, can be significantly affected by the underlying accounting treatment. Therefore, an overhaul of the accounting basis on which leases are accounted for may have an unintended tax impact for businesses.  The, Government has recognised this and will consult over the course of summer 2017 on legislative changes that are needed to enable the tax rules to continue to work as intended.

The current leasing rules for plant and machinery were not exactly celebrated by the industry when they were introduced, particularly to do with the overall drafting of the rules. Therefore, this would provide a welcome opportunity for a re-write!

By Greig Simms (Greig.Simms@mazars.co.uk)

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *