HMRC Accounting & Tax Group

Notes of Meeting - 19 April 2007 at 10.00

Matt Blake- Commissioners’ Advisory Accountant (MB) HMRC
Allana Sheil - CT & VAT (AS) HMRC
Michelle Telford - Asst Commissioners’’ Advisory Accnt (MT) HMRC
John Harnedy (JH) HMT
Priyen Patel (PP) HMT
Richard Martin (RM) ACCA
Lakshmi Narain (LN) CIOT
John Cullinane (JC) CIOT
Phillip Gillet (PG)

Apologies:

Andrew Lennard ASB, Chas Roy-Chowdhury ACCA, Ian Menzies-Conacher CBI, Frank Haskew, ICAEW, Josephine Crimmin HMRC. Simon Woodside HMRC

James Barbour of ICAS had hoped to attend by video link but he was not able to connect successfully.

1. Minutes of previous meeting & matters arising

The minutes had already been agreed when they were circulated in February. They would be posted on the Consultative Forums website when it was updated.

It had been agreed when setting the terms of reference that the group should be flexible on the precise date of meetings. AS said had been asked if the October meeting date could be changed since it clashed with an ASB meeting. It was agreed that the meeting could be moved to 1 November providing this was acceptable to the majority.

2. Hot topics and future developments

MB explained the format of the updated Forward Look schedule - emailed in advance of the meeting. Everything of note was on the first four pages headed Hot Topics/New Developments. Some of these had been selected as agenda items.

(a) Companies Act 2006

MAS explained that work was going on within HMRC on its implementation.

(b) IFRIC 12 Service Concessions

HMRC had received a couple of approaches on this finalised interpretation from those with PFI interests. It was agreed that this topic might be suitable for taking forward by a sub group.

MB asked the group for their thoughts on the draft.

RM commented that it could be important for the future of UK GAAP, depending on how the ASB took the matter forward. However, given the take up of IFRS, it would be more relevant for the medium rather than the short term. The following issues were also discussed - whether the draft would be endorsed by the EU, time lags, whether the profit figure produced using this IFRS would be the same as that produced by full IFRS, its effect on share based payments, the changes in the disclosure requirements, its possible use for solus accounts and for medium groups and large unlisted groups. Some thought that its use for small companies was inappropriate and there was a wish to preserve the FRSSE. The ASB was currently consulting on the document and it was likely to want substantial changes. RM offered to provide some work that the ACCA had done giving details of how the draft differed and this offer was gratefully accepted. MB commented that any information on how it was likely to work in practice would also be much appreciated.

(d) Decision of House of Lords in appeals of Mars and William Grant

MB commented that HMRC was currently considering any repercussions arising from their Lordships’ decision. He asked if the group, or the people they represented, had any feel for what the decision might imply – he wanted an accountant’s view of how he accounted for things. The possible impact was then discussed.

3. Other hot topics and developments per schedule

MB asked if there were any items that the group thought were inappropriate for the schedule. The group felt that a couple of UITFs, including UITFs 43 and 44, could be omitted since they didn’t require that anything different be done.
UITF 45 implementing IFRIC 6 was discussed –the point of obligation was clear – it would have tax effects but these were not likely to be of concern.
UITF 40 was again discussed – AS mentioned that she had addressed the new Large Partnership units on the subject. It was agreed that most of the first accounts that would be affected had been submitted, especially since large partnerships often had June or September year ends.
The question of what to do when the FRSSE was silent on a particular issue was discussed and AS agreed to see if she could find any HMRC guidance on the subject that was still current.
Heritage assets – would affect mainly charities but also groups with land, nature reserves etc, collected over a number of years.
WIP on service contracts with contingent fees was discussed. Concerns were expressed on the whole issue of revenue recognition if IASB moves further towards fair value in this area, eg - opportunity profits.
Amendments to IAS 23 -RM commented that in the vast majority of cases the interest is expensed, only where there was a major capital project might it be capitalised. PG added that the inability to allocate interest to projects may solve the issue.
The Exposure Draft amendments to IAS 37 were again debated but the group needed to await the IASB’s final version before thinking further.
Exposure Draft amendments to IFRS 1 – the group thought that if the amendments went through it might encourage more to adopt IFRS but overall the amendments were not that helpful. It was IAS 27 that needed amending.

4. Other items on the schedule and as identified by the group

EC Simplification of accounting rules for small and medium-sized companies - micro enterprises might be hit by these changes.

MB thanked JC for the paper he had sent on IAS impacts, which had been circulated before the meeting. Having views generated from preparers, advisers and auditors was extremely useful.

5. Report of the IAS 39 working group

AS reported on behalf of the working group.

Two statutory instruments, one amending the Disregard Regulations and the other amending the Change of Accounting Practice Regulations were laid at the time of the Budget.
Representations had been received about the impact of FRS23 in determining a company’s functional currency. HMRC would be gathering evidence on an informal basis and would welcome views.
There would be a project on forex matching undertaken this year.
Although there was nothing in this year’s Finance Bill arising directly from the work of the IAS 39 group HMRC was continuing to monitor the effects of changes to the loan relationship legislation made in FA 2004 and would be pleased to hear of any problems.
HMRC was continuing to work with HMT on developing provisions for unclaimed balances held by banks and other financial institutions.
The Corporate Finance manual had been substantially updated in March.

6. Any other business

None.