On 19 March 2020 HMRC published a consultation document - ?Taxation impacts arising from the withdrawal of LIBOR? - together with draft guidance on the UK tax implications.

In the consultation, HMRC's narrower aim is to identify any statutory references to LIBOR in UK tax legislation that need to be updated and to consult on an appropriate replacement rate. The more substantive aspect of the consultation is an evidence-gathering exercise to understand the full breadth of tax impacts that could arise from LIBOR transition. It is relatively clear that HMRC believes that, other than updating statutory references, there should be no need to legislate to deal with UK tax issues arising from the LIBOR transition and that any remaining issues can be dealt with in guidance.

The draft guidance provides helpful confirmations on the expected tax treatment of replacing or amending existing agreements to address the withdrawal of LIBOR, as well as on the interaction with proposed accounting changes. Nonetheless, there are still a few points that would benefit from further clarity as discussed in our more detailed note linked below.

On the whole, this consultation should be seen as a positive move by HMRC to help those across the market understand the tax impact of the different mechanisms that may be used to effect the transition away from LIBOR.

Comments on the consultation are requested by 28 August 2020. For more details, please see our note on the HMRC consultation and draft guidance, available here.

If members would like to get involved in UK Finance's tax policy work, including on this consultation, please contact sarah.wulff-cochrane@ukfinance.org.uk.