UK: Autumn Statement predictions for businesses; loans and derivative contracts

UK Autumn Statement

The Chancellor will deliver the Autumn Statement on 25 November 2015, and it is anticipated that the Autumn Statement might provide more detail on how the UK plans to implement the OECD’s base erosion and profit shifting (BEPS) proposals. The government previously said it will be considering the recommendations set out in the BEPS reports as part of the development of a new “business tax roadmap” expected in spring 2016.

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In the meantime, consultations in the UK have been opened concerning: (1) how the UK’s patent box could be modified to comply with BEPS Action 5; and (2) how the UK’s rules on the deductibility of corporate interest expense would be affected by BEPS Action 4.

Treatment of loan relationships, derivative contracts

The treatment of credits and debits arising in respect of loan relationships and derivative contracts is changing; they will now only be brought into account for tax purposes when they appear in the profit and loss (P&L) statement. These changes were introduced were introduced by Finance Bill 2015-16, for accounting periods beginning on or after 1 January 2016.

HMRC guidance on non-market rate loans

HMRC in late October 2015 published draft guidance on the corporation tax treatment of loans when the interest rate is not a market rate, resulting in accounting debits and credits when new GAAP accounting standards are being applied. The guidance focuses on the application of the transfer pricing rules and the meaning of the term “amortised cost basis of accounting” which is mandatory for loans between connected companies. The new rules would be relevant for new loans and for existing loans when the company transitions to new GAAP accounting standards.

 

Read a November 2015 report [PDF 781 KB] prepared by the KPMG member firm in the UK:  Weekly Tax Matters (6 November 2015)

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