Act now on IFRS or risk losing billions, HMRC warned

The government needs to act on IFRS tax rules or risk billions of pounds of
revenues, advisers have claimed.

HM Revenue & Customs is in the process of resolving guidelines governing
implications of complex financial instruments, the accounting for which has
changed under IFRS.

HMRC has not yet introduced the guidelines, which need to be in place by the
end of the year, with convention dictating that the taxman would introduce the
rules at least 21 days before implementation, or at the latest by 10 December.

‘People have been thinking, HMRC are going to get it right. I am no longer so
sure,’ Roger Muray, an Ernst & Young IFRS tax expert, said.

The rules govern the treatment of financial instruments hedging values
running into the tens and potentially hundreds of billions of pounds. The
instruments give rise to significant tax implications, meaning the HMRC stands
to lose billions if it gets the rules wrong.

‘At present there is a huge amount of uncertainty,’ Muray said.

HMRC is believed to be understaffed on the issue, with key figures having
been overburdened with anti-avoidance initiatives. The matters involved are
thought, additionally, to be so complex that ministers have had trouble
understanding them.

A spokesman for HMRC played down the anxieties. ‘We expect to get everything
done on time,’ he said.

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Fiona Westwood of Smith and Williamson.