Income Tax and Corporation Tax rules for spreading transitional adjustments on new lease accounting
Published 11 July 2019
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This publication is available at https://www.gov.uk/government/publications/income-tax-and-corporation-tax-rules-for-spreading-transitional-adjustments-on-new-lease-accounting/income-tax-and-corporation-tax-rules-for-spreading-transitional-adjustments-on-new-lease-accounting
Who is likely to be affected
Businesses that are lessees of business assets which adopt the new lease accounting standard, International Financial Reporting Standard 16 (IFRS 16).
General description of the measure
Finance Act 2019 introduced legislation requiring those businesses adopting IFRS 16 to spread the tax impact of any transitional lease accounting adjustment over the average remaining lease term. This measure makes minor amendments to the spreading rules to put beyond doubt that they apply to all lessees adopting the new accounting standard for any period of account.
Policy objective
This measure provides certainty and stability for businesses and the Exchequer. It ensures fairness for lessees adopting the new accounting standard whenever they first adopt IFRS 16.
Background to the measure
The International Accounting Standards Board issued IFRS 16 on 13 January 2016.
The government consulted widely in respect of the options for tax responses, and took account of responses received in deciding to introduce the legislation set out at Schedule 14 to the Finance Act 2019. A summary of the consultation responses, along with draft legislation, was published on 6 July 2018.
This measure confirms that the legislation set out at Schedule 14 applies to all lessees adopting the new accounting standard, whenever they first adopt IFRS 16.
Detailed proposal
Operative date
These amendments have effect for periods of account beginning on or after 1 January 2019.
Current law
Current law is included in Schedule 14 to the Finance Act 2019.
Proposed revisions
Amendments will be made to paragraph 13 of Schedule 14 to the Finance Act 2019, to confirm that the spreading requirements set out in that paragraph apply to any period of account beginning on or after 1 January 2019.
The amendments put beyond doubt that the spreading requirements apply to any period of account beginning on or after 1 January 2019 in which the new accounting standard is first adopted.
Consequential amendments will be made to paragraph 14 to make sure that paragraph continues to apply as intended.
Summary of impacts
Exchequer impact (£million)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| - | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
The measure supports the Exchequer in its commitment to protect revenue.
Economic impact
The measure is not expected to have any significant macro-economic impacts.
Impact on individuals, households and families
This measure has no impact on individuals and households because it only affects businesses.
There is no impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be any impact on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have no new impact on business and civil society organisations, as it just confirms that the legislation delivers the previously announced policy.
Operational impact (£million) (HMRC or other)
This measure has no operational impact costs.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through regular communication with affected taxpayer groups to ensure the legislation is operating as intended.
Further advice
If you have any questions about this change, contact Alex Sherwood on telephone: 03000 551801 or email: alex.sherwood@hmrc.gov.uk.