Introduction Background Note
12.In July 2009, the International Accounting Standards Board (IASB) issued proposals to amend the accounting standard on financial instruments (IAS 39 – “Financial Instruments: Recognition and Measurement”). Changes to IAS 39 will have a significant impact on the CT rules on loan relationships and derivative contracts in Parts 5 to 7 of CTA. One of the key principles in these rules is that amounts brought into account for tax purposes are based closely on the profit or loss shown in accounts drawn up in accordance with generally accepted accounting practice (GAAP). GAAP includes both International Accounting Standards and their UK equivalents issued by the Accounting Standards Board (ASB). Changes made by the IASB are likely to be followed by the ASB for UK GAAP.
13.It is anticipated that the amendments to IAS 39 will be made in stages, between 2009 and 2013. Each draft proposal for changes to the current standard is subject to consultation, and the final version of any new or amended standards may differ from the original draft. The first stage in this programme was the issue of a new standard, International Financial Reporting Standard (IFRS) 9, in November 2009. IFRS 9 allows a company to adopt the new standard for the period ending after it was issued, and it is possible that other new or amended standards will similarly allow for adoption in the period in which they are issued.
14.The CT rules on loan relationships and derivative contracts contain a number of regulation-making powers, but these powers are unlikely to permit the type of amendments to those rules that may be needed to cater for the extensive changes to accounting standards that have recently been, or are expected to be, announced by the IASB.
15.There would be uncertainty for both companies and for the Exchequer if it was necessary to wait for the next Finance Act to address the changes to tax rules which are likely to be needed as a consequence of the accounting changes. The new regulation-making powers inserted by this Schedule enable such changes to be made as and when the accounting changes are announced, and for any period to which they apply.