Finance Bill Tracking Service 2010 | Budget 2010


Who is likely to be affected?

1. Companies for which the accounting standards on financial instruments, such as loans and derivatives, have a significant impact on the computation of profits and losses for corporation tax (CT). Smaller companies that have adopted the Financial Reporting Standard for Smaller Entities are less likely to be affected.

General description of the measure

2. Legislation will be introduced in Finance Bill 2010 to allow regulations to be made to amend the CT rules on loan relationships and derivative contracts, where it is necessary to change tax rules as a consequence of a change in accounting standards.

Operative date

3. The legislation will allow regulations to come into force on or after the date that Finance Bill 2010 receives Royal Assent. However, where a change of accounting treatment is effective in an accounting period beginning before that date, such regulations may apply retrospectively.

Current law and proposed revisions

4. The CT rules on loan relationships and derivative contracts in Part 5 and Part 7 of the Corporation Tax Act 2009 (CTA) contain a number of regulation-making powers. However, these powers will not permit the type of amendments to those rules that are likely to be needed to cater for the extensive changes to accounting standards that the International Accounting Standards Board (IASB) are currently making as part of its project to develop new financial reporting standards for financial instruments.

5. New powers will be inserted into Part 5 and Part 7 of CTA which will permit regulations to be made amending the tax rules in those Parts, where, as a consequence of a "change in accounting standards" there is a "relevant accounting change". A "change in accounting standards" refers to the issue, revocation or amendment of an accounting standard by the IASB or the UK Accounting Standards Board. A "relevant accounting change" is a change in the way a company recognises in its accounts the amounts that are brought into charge for tax purposes.

6. Regulations made under these powers will be subject to the affirmative procedure for passing secondary legislation. The first set of regulations to be made under this power will cover tax changes consequent on the new International Financial Reporting Standard 9, dealing with the classification and measure of financial assets, published in November 2009.

Further advice

7. If you have any questions about this change, please contact Sue Davies on 020 7147 2565 (email: or Tony Sadler on 020 7147 2608 (email: Information about Budget measures is available on the HM Revenue & Customs website at