With the IFRS 15 effective date slated for accounting periods on or after  1 January 2019, HMRC plans to run a short informal consultation over potential plans to change tax rules for those reporting under  International Financial Reporting Standards (IFRS).

For UK GAAP users there will be no changes to current practice as the new lease approach has not been incorporated into FRS 102.

Due to the complexity and reach of the new accounting standard, HMRC is initially gauging views on some of the main issues likely to be faced by company reporters, before writing the more detailed consultation documents.

Under IFRS, the long funding lease rules apply differently, though with the same overall outcome, according to whether the lease in question is a finance lease or an operating lease, for example. There are also a number of provisions around anti-avoidance which HMRC would need to review.

HMRC is considering a number of options, including a new tax regime based on accounting entries, accounts based with leasing allowance, or accounts-based with capital allowances.

It also says that it would consider retaining the status quo with ‘Minimal change to the statutory provisions to ensure that the current tax regime continues to function and deliver the same outcome for tax purposes’. However, it seems unlikely that the status quo would be compliant with IFRS 16.

The main plank of the standard overhauls the treatment of leases on to the balance sheet as a lessor under a finance lease will replace the fixed asset on its balance sheet with a financial asset that records the value of the lease – the 'net investment in the lease'. That asset reduces as the rentals are received.

The discussion document covers:

• current lease accounting and tax rules;
• new lease accounting and tax impacts of IFRS 16;
• options for tax changes;
• current and expected future commercial environment;
• simplification options; and
• protection of revenue for the Exchequer.

HMRC is seeking views from all interested stakeholders on possible options for the tax changes required, particularly from lessees, lessors, professional agents and representative bodies. We are happy to meet with stakeholders to discuss the issues, views and concerns and any alternatives.

After considering responses from the discussion period the government will then formally consult on their preferred option.

At Budget 2016 the government announced its intention to issue a discussion document setting out options for the tax response to these lease accounting changes.

The deadline for feedback is 30 October at 11.45pm.

Responses should be sent by 30 October 2016, by e-mail to [email protected] or by post to Paul Hindley, Room 3/64 100 Parliament Street, London SW1A 2BQ

The discussion document, Lease accounting changes is available here.