UK IFRS 18: New Reporting Requirements on the Horizon by 2027

The UK government is introducing significant changes to the IR35 off-payroll working rules, set to take effect in April 2024. These updates aim to tackle double taxation concerns and streamline compliance with HMRC regulations.

Double Taxation Resolved

The new rules will address the long-standing issue of double taxation within the IR35 regime. Historically, when HMRC challenges an “outside IR35” determination—where workers are deemed independent contractors—double taxation could arise. Under the revised system, if a status is contested, HMRC will only seek to recover the tax difference, ensuring that workers and employers do not pay twice for the same tax year. This move has been welcomed by both businesses and contractors, who have long voiced concerns about the complexity and unfairness of the old system.

Non-Compliance Penalties to Increase

However, the government is taking a harder stance on non-compliance. From April, businesses and contractors found to be in breach of IR35 rules will face substantial penalties:

• 30% for errors leading to unpaid tax
• 70% for knowing non-compliance
• 100% for deliberate concealment

These penalties underscore the need for organisations to ensure their IR35 assessments are accurate and that compliance measures are robust. With potential legal complications also in play, businesses are urged to review their IR35 processes ahead of April 2024.

IFRS 18: New Reporting Requirements on the Horizon by 2027

In parallel to the changes in IR35, the accounting world is bracing for the arrival of IFRS 18, which is expected to replace IAS 1 by 2027. This new standard, while not altering the recognition or valuation of assets and liabilities, will bring significant changes to the structure of financial reporting.

Reordering the Profit and Loss Statement

The most notable change under IFRS 18 is the reordering of the profit or loss statement. Companies will need to adapt to a new format that requires more detailed disclosures than previously mandated under IAS 1. For many businesses, this will involve a comprehensive overhaul of how they present their financial results.

Multinational Companies Face Added Pressure

For multinational companies, the transition to IFRS 18 poses additional challenges. A recent UK survey found that 83% of firms are currently unprepared for the implementation of IFRS 18, with many citing the need for further support as the deadline approaches. Given the complexity of the changes, early preparation will be key to ensuring a smooth transition.

Key Takeaways for Businesses

With April 2024 marking the beginning of the new IR35 rules and 2027 bringing IFRS 18 into force, businesses face substantial regulatory shifts over the next few years. Compliance will be critical, not only to avoid penalties but also to ensure financial reporting remains accurate and transparent. Firms are encouraged to stay ahead of these changes by seeking professional advice and bolstering their compliance frameworks.