Tax implications of benchmark reform: HMRC weighs in

The publication of the London inter-bank offered rates (LIBORs) is expected to cease after the end of 2021. Contracts referencing LIBORs with a term beyond 2021 (so-called ‘legacy’ contracts) will therefore need to be amended, to transition to the alternative reference rates (RFRs) which will replace the various LIBORs. Other benchmarks are undergoing similar reforms. HMRC has: published draft guidance setting out its views on the tax implications of transition; and launched a consultation inviting taxpayers to comment on the draft guidance, and identify any other tax issues arising from benchmark reform. Overall, HMRC has taken a sensible approach, and its draft guidance will give some comfort to affected taxpayers. However, there is some remaining uncertainty due to omissions from the draft guidance, the subjective judgement required by certain aspects of the draft guidance, and the likely timing of final guidance. Comments are invited by 28 May 2020.