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Consultation on the tax impact of the withdrawal of LIBOR

Consultation on the tax impact of the withdrawal of LIB

HMRC have launched a consultation on the withdrawal of the London Interbank Offered Rate. Draft guidance has also been issued.


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The London Interbank Offered Rate (LIBOR) is a benchmark interest rate which is commonly used in loans, derivatives and other financial products and instruments. It is expected to be withdrawn at the end of 2021.There are some areas in the legislation (relating to leases) that refer to LIBOR and will need to change, replaced with other benchmark rates under consideration (e.g. the Sterling overnight interbank average rate). HMRC highlight several LIBOR statutory references and are seeking views on how to change the legislation including views on alternative benchmark rates. The consultation also seeks to identify any significant tax issues that are expected to arise from the transition from LIBOR and equivalent benchmark rates.

Who is this relevant to?

This consultation is relevant to all corporates and financial institutions with LIBOR (or equivalent) funding, financial products and/or derivative contracts. Treasury team input should be sought for views on new benchmark rates for tax legislative proposals. Treasury, commercial, legal and accounting contacts should be consulted to understand all of the transitional issues facing companies and the expected tax consequences.

What will the impact be?

Cash tax volatility can arise in the lead up to and on transition and groups will need to consider if this is manageable. At this stage, HMRC are not proposing special LIBOR tax transition legislation, so the consultation is a chance to influence policy and identify any previously unanticipated issues. The HMRC draft guidance, which has already had input from certain stakeholders, summarises the legal and accounting issues and sets out HMRC’s views on the main tax implications for businesses from LIBOR reform.

Other considerations

In the longer term, the impact for groups and funds transfer pricing policies and pricing should be considered. Transfer pricing documentation will need to be updated.


Feedback is required by 28 May 2020.

For further information please contact:

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