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Law Society responds to CIR and lease accounting changes

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The Law Society’s tax law committee has published its response to HMRC’s consultation, published in December, on three alternative proposals for how the corporate interest restriction (CIR) rules could be amended to cater for the IFRS 16 accounting changes.

The response contains high level observations on areas needing careful consideration in drafting the proposed legislation. According to The Law Society, each of the three options outlined in the consultation ‘are likely to create compliance difficulties for some lessee entities as well as creating distortion between the taxation treatment of two otherwise identical lessees, simply because of the accounting standards adopted at group level’.

The Law Society also suggests that ‘an alternative approach would be to follow a modified version of Option 2 which does not require information to be obtained from third party lessors where the lease is an operating lease under the test, together with an option for taxpayers simply to apply the existing rules as they apply to the accounts following the introduction of IFRS 16’. See

The committee has also issued its response to HMRC’s consultation on plant and machinery lease accounting changes (