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New UK GAAP - tax implications of moving to FRS 102

Companies moving to the new UK GAAP – including those moving from the FRSSE to FRS 102 in 2016 – will need to consider the tax implications of the new regime carefully, not only on transition but also on an on-going basis. Planning ahead could reduce or eliminate any undesirable consequences.

Transitioning to the UK’s new financial reporting regime will result in a number of changes in accounting treatment that – given that the tax treatment often simply follows the accounting treatment – will potentially affect the basis for calculating a company’s corporation tax. In some cases the tax consequences could be significant.

Many entities will find that their financial instruments – including loans and derivatives such as forward contracts and interest rate swaps and non-market rate loans – will be accounted for differently under the new regime and this could significantly affect their expected tax cash flows.