Draft Finance Bill measures

The Government has today issued for consultation draft legislation intended for inclusion in the Finance Bill to be introduced later this year, after the Autumn Budget. This extends to 226 pages of legislation and 143 pages of explanatory notes.

The consultation runs to the end of August.

The draft clauses and Schedules published today contain provisions relating to the following areas.

Income tax
  • Rent-a-room relief: an additional test requiring the physical use of the accommodation by the landlord (or member of the landlord’s household) to overlap wholly or partly with the use by the tenant, from 6 April 2019.
  • Gift aid: simplified limits on associated benefits for donations on and after 6 April 2019
Employee taxation
  • Optional remuneration arrangements: cars and vans – technical changes, with effect from 6 April 2019.
  • Vehicle battery charging at workplace: exemption for benefit, from 6 April 2018.
  • Private use of emergency vehicles: changes to tax treatment, from 6 April 2017.
  • Scale rates for travel expenses: checking requirements on employers reduced; existing HMRC administrative arrangements for overseas rates to be brought into legislation; both with effect from 6 April 2019.
  • Tax exemption for premiums paid by employers into life assurance products and certain overseas pension schemes: relaxation of rules as regards named beneficiary, from 6 April 2019.
Capital gains
  • Gains on interests in UK land realised by non-resident individuals and companies (including certain ‘indirect disposals’) brought into charge insofar as not already chargeable, and the ‘ATED-related gains’ charge abolished; reporting and payment on account obligations extended accordingly; all from 6 April 2019.
  • Capital gains tax (CGT) new reporting and payment on account obligations in respect of UK residential property gains chargeable on UK resident persons or branches of non-resident persons, from 6 April 2020.
  • Entrepreneurs’ relief: individuals whose shareholding is diluted below the 5% threshold as a result of a new share issue to be able to obtain relief for gains up to the time of the dilution, for new share issues on or after 6 April 2019.
  • Exit charges under existing rules: provision to defer the charge to comply with EU law, from 6 April 2019 (CGT) or 1 January 2020 (corporation tax, where some deferral already applies).
Business taxation
  • Profit fragmentation arrangements: anti-avoidance rules to prevent business profits being taken out of the UK tax charge by being attributed to offshore entities, from 6 April 2019 for income tax or 1 April 2019 for corporation tax.
  • Oil companies: transfer of tax history on the sale of an oil licence to enable buyer to reclaim tax in some circumstances on decommissioning, for transfers approved on or after 1 November 2018.
  • Petroleum revenue tax: relief for decommissioning expenditure incurred or funded by a previous holder of an interest in an oil field, for transfers approved on or after 1 November 2018.
  • Leases: changes to tax rules as a result of the adoption of International Financial Reporting Standard 16, to apply for periods of account commencing on or after 1 January 2019.
Corporation tax
  • UK property income of non-UK resident companies charged to corporation tax rather than income tax from 6 April 2020.
  • Relief for carried forward losses: technical changes from 6 July 2018 and from 1 April 2019.
  • Corporate interest restriction: technical changes with effect from various dates – some backdated to the commencement of the legislation on 1 April 2017, some applying to periods of account that begin on or after 1 January 2019, and one applying to returns submitted on or after 1 April 2019.
  • Hybrid and other mismatches regime: changes in relation to the treatment of permanent establishments from the original commencement date of 1 January 2017 and regulatory capital from a date to be appointed by regulations.
Value added tax
  • Vouchers: changes in accordance with Council Directive (EU) 2016/1065 for vouchers issued on or after 1 January 2019.
  • VAT groups: non-corporate entities eligible to join a VAT group from a date to be appointed by statutory instrument.
  • Repayment interest: rules brought into line with income tax self-assessment rules from a date to be set by statutory instrument.
Stamp taxes
  • Stamp duty and stamp duty land tax (SDLT) exemption on exercise of certain powers under the special resolution regime in the Banking Act 2009 for managing failing financial institutions.
  • SDLT: reduction in time limit for filing a return and paying tax in England and Northern Ireland from 30 to 14 days, for transactions on or after 1 March 2019.
Climate change levy
  • Exemption for energy used in mineralogical and metallurgical processes redefined with effect from Royal Assent to the Finance Bill.
Tax administration
  • Late filing: existing late submission penalties replaced with a points-based system from dates to be set by statutory instrument, which will be different for different taxes. The Government has stated that ‘The new regime is likely to initially apply to regular VAT and ITSA [income tax self-assessment] obligations. Other excise, environmental, insurance and transport taxes are included within the scope of legislation since the Government intends to introduce the new regime more widely after VAT and ITSA. The government intends to bring Corporation Tax within the scope of the regime at a later date.’.
  • Penalties for failure to pay tax: a new two-tiered penalty system for individuals and businesses that fail to pay their tax liability on time, to apply from dates to be set by statutory instrument, which will be different for different taxes. The Government has stated that ‘The new regime is likely to initially apply to regular VAT, CT and ITSA obligations. Other excise, environmental, insurance and transport taxes are included within the scope of legislation since the government intends to introduce the new regime more widely after VAT and ITSA.’.
  • Time limits for income tax and capital gains tax assessment involving offshore matters increased to 12 years in two stages from the tax year 2013/14 onwards, with similar changes to inheritance tax for chargeable transfers on or after 1 April 2013.
  • Security deposits: construction industry scheme and corporation tax – HMRC given powers to make statutory instruments as regards the provision of security (which HMRC intends to do with effect from 6 April 2019).
  • Double tax disputes: powers given to the Treasury to implement the EU directive on tax dispute resolution mechanisms and similar agreements by statutory instrument.
  • Disclosure of cross-border arrangements: power given to the Treasury to make regulations to give effect to international rules.
Various other measures dealing with excise duties are not covered here.

A number of the provisions listed above relate to measures that were announced in principle in the Budget on 22 November 2017, and which have been the subject of consultation exercises since then.

The resulting Bill will be called the Finance (No 3) Bill, because it will be the third Finance Bill to be published in the current Parliamentary session, which runs from June 2017 to June 2019. It will become the Finance Act 2019, because it will be the first such Act of that calendar year.

For further information please contact your usual Moore Stephens adviser.

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