IFRS further remedial: Anti-arbitrage rules for certain methods
2010 Act makes a remedial amendment to the anti-arbitrage rules for International Financial Reporting Standards (IFRS) taxpayers.
The Act makes a remedial amendment to the anti-arbitrage rules for IFRS taxpayers. Each of the above sections has had a new sub-paragraph added to them to ensure they fully implement the original policy for use of the relevant methods.
The amendments ensure that the relevant methods can be used for financial arrangements which are treated under IFRS as hedges of non-financial arrangements. The sections now reflect that the anti-arbitrage rules apply to financial arrangements which are in an IFRS-designated hedging situation.
A further amendment is proposed to the anti-arbitrage rules in legislation to be introduced in late 2010. The anti-arbitrage rules are intended to prevent income and expenditure from being deferred or advanced on two financial arrangements which are in an IFRS-designated hedging relationship. However, in amending the rules in 2009 the ability to use the fair value method for financial arrangements that are used to hedge other financial arrangements (being agreements for the sale and purchase of property in foreign currency subject to a determination method - G9) was inadvertently denied. Inland Revenue proposes to correct this error, allowing the fair value method to be used in such circumstances. This amendment will be on very specific terms and it will not be intended to otherwise alter the application of the anti-arbitrage rules or the taxation of the agreements for sale and purchase of property in foreign currency under determination G9.
The amendments apply from the date of the original legislation, being 1 April 2007 for the Income Tax Act 2004 and 1 April 2008 for the Income Tax Act 2008.