Finance Act 2016

The Finance Bill 2016 received Royal Assent on 15 September 2016, becoming the Finance Act 2016. Earlier this year we reported on the key tax changes announced in the Budget 2016 and the Finance Bill, however during the progress of the Bill through Parliament, various amendments were made and new clauses have been introduced in advance of Royal Assent being granted.

Of the amendments made and new clauses introduced during the progress of the Bill, the following are of particular interest:
  • The newly introduced Investors’ Relief applies a reduced capital gains tax rate of 10% to disposals of qualifying shared in unlisted trading companies held by individuals who have generally had no connection with the company. The Bill was amended to broaden the scope of the relief and we have published a separate article to explore these changes in greater detail. Click here to read our update on the amendments.
  • Ordinarily stamp duty is chargeable at 0.5% on the purchase of UK shares, however ‘share for share’ relief is available to ensure that there is no stamp duty where shares in one company are exchanged for newly issued shares in another company as part of a company reconstruction, provided certain conditions are met. The Finance Bill was amended to ensure that no share for share relief will be available where arrangements are in place at the time of exchange for a change of control of the acquiring company.
  • Historically, non-resident companies which develop properties in the UK were subject to corporation tax on profits of any trade carried on through a UK permanent establishment (PE). However, if there was no PE (for instance, due to the operation of a double tax treaty), no corporation tax was due.
New clauses were introduced within the Finance Bill to extend the scope of corporation tax so that non-residents that generate profits from dealing in and developing UK land are fully subject to UK tax on the profits of that trade, instead of being taxable only on the profits of its PE.

If you would like further information on any of the points raised above or the Finance Act in general, please contact your usual Moore Stephens adviser.

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