Derivatives users outside the major financial institutions may be left behind when the Inland Revenue, the U.K. tax authority, starts its second bout of consultation on derivatives taxation under International Accounting Standards. Officials say the Revenue, which has delayed publishing guidelines for a year (DW, 12/13), will be under pressure to complete consultation in time for the Finance Bill in spring. The time pressure means consultation will likely be in the form of working groups and discussions with the dominant financial institutions. Francis Taylor, spokesman for the Inland Revenue in London, did not return calls.
"The implications of IAS affect everyone, not just those in the know, so some people will be left behind," said John Cullinane, head of banking capital markets tax atDeloitte in London. The taxation of embedded derivatives has already been signaled by the Revenue as an area for consultation next year because it was brought to the authority's attention after the Finance Bill 2004 was drawn up. It is inevitable there will be further problems, such as how to deal with embedded derivatives, that will be identified late in the day, added Cullinane. "IAS is like a revolution in accounting, so you can't predict what all the issues will be," he said.
