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New relationship

23 February 2016 / Jo Houghton
Issue: 4539 / Categories: Comment & Analysis

The interaction between FRS 102 and the new loan relationship legislation.


  • HMRC is seeking to align the taxing of loan relationships more closely with the accounting treatment.
  • FRS 102 changes for interest-free and non-market loans can create significant accounting adjustments in the year of transition.
  • The interaction of FRS 102 with the amended loan relationship rules after January 2016 can create an asymmetric tax treatment.
  • Draft Finance Bill 2016 changes aim to address some of the issues.
  • The piecemeal introduction and amendment of legislation is likely to confuse.

When HMRC issued its consultation document  Modernising the taxation of corporate debt and derivative contracts ( a key area for discussion centred on basing taxable amounts on accounting profit and loss. The updated loan relationship legislation was enacted in F(No 2)A 2015 Sch 7 and generally...

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