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Next month’s General Election has resulted in changes to the Finance Bill. Read our summary now.

When Members of Parliament backed the motion by 522 to 13 on holding an early General Election on Thursday 8 June under the Fixed-Term Parliaments Act, one of the consequences was the removal of contentious clauses within the Bill. This is to ensure the passage of the Bill before Parliament dissolves.

Schedule 25 Making Tax Digital

The removal of Schedule 25 Making Tax Digital has resulted in changes to the associated recordkeeping requirements. In the Trading and property businesses income section Clause 19 and 20 resulted in the removal of Schedule 5 contains provision about the calculation of the profits of a trade, profession or vocation or a property business, in particular the calculation of profits on the cash basis and Schedule 6 contains provision about a trading allowance and a property allowance giving relief from income tax.

Schedule 5 contained the changes to ITTOIA for the calculation of profits when using the cash basis. It included the basis for the calculation along with the £150,000 receipts limit and treatment of capital expenditure. This had a commencement date for the 2017/18 tax year.

The Schedule 6 amendments were also to be effective from 2017/18 and related to  reliefs for an individual regarding income of a relevant trade and miscellaneous income.

In the Administration, Avoidance and Enforcement section the clauses 120 to 122 relating to Reporting and record-keeping being Digital reporting and record-keeping for income tax etc, further amendments and Digital reporting and record-keeping for VAT – which all relate to the digital record keeping requirements as part of the schedule 25 MTD  – were removed.

Additionally it is interesting to note the response to the House of Lords Committee following their report. Before Parliament was dissolved the government issued its reply to the questions raised by the House of Lords Economic Affairs Finance Bill Sub-Committee. This followed the Committee questioning the cost-to-business assumptions and calling for government to delay the scheme until 2020 to allow for a full pilot and ACCA’s evidence is quoted several times. It is clear in the reply from the government that it is ‘committed to the digital future of the tax system’ and will ‘pursue Making Tax Digital measures in a Finance Bill in the next Parliament’. Recognising the concerns raised, the letter also states that ‘all elements of Making Tax Digital will be fully tested before mandation’.

The Bill IR 35 for the Public Sector is retained, being schedule 1 and is not listed as one of the removed schedules and this continues in force.

The Investment Income and Reliefs Section sees some changes withclause 21 and the changes detailed in schedule 7 remaining. The following clauses – for many of which the changes applied from April 2017 – are all being withdrawn:

Other clauses dropped from the Bill include those on corporate loss relief and interest deductibility, VAT in relation to fulfillment houses and penalties for enablers of defeated tax avoidance schemes.

The removal of clause 5 (detailed below) will see the dividend nil rate stay at £5,000 for 2018/19 unless amended by a Bill later this year or early next year:

“Dividend nil rate for tax year 2018-19 etc

(1)In section 13A of ITA 2007 (income charged at the divided nil rate), for “£5000”, in each place, substitute “£2000”.

(2)The amendments made by this section have effect for the tax year 2018-19 and subsequent tax years”.

Employment income

Clauses 9,10 and 12 to 16 saw the removal of proposed changes that impacted the 2017/18 tax year. The exception being the ultra-low emission vehicles which have effect for the tax year 2020-21 and subsequent tax years. The taxes impacted were:

  • taxable benefits: time limit for making good
  • taxable benefits: ultra-low emission vehicles
  • provision of pensions advice: limited exemption
  • legal expenses
  • termination payments etc: amounts chargeable on employment income
  • PAYE settlement agreements.

Corporation tax

Many of the changes around corporation tax were due to commence for accounting periods beginning on or after 1 April 2017. The following corporation tax relief changes and changes to other areas in clauses 29 to 36 of schedule 9 have all been removed:

Chargeable gains

The following chargeable gains changes clauses 37 to 40 were all removed:

Provisions relating to more than one tax: domicile, overseas property etc

The following chargeable gains changes clauses 41 to 44 were all removed:

Disguised remuneration

The disguised remuneration changes clauses 49 to 51 being Trading income provided through third parties, Disguised remuneration schemes: restriction of income tax relief and Disguised remuneration schemes: restriction of corporation tax relief

Other clauses removed

These include clauses 52 to 56, 60, 62 and 63, 66 and 67 and 70 relating to

First-year allowance for expenditure on electric vehicle charging points,

Disposals concerned with land in United Kingdom,

Co-ownership authorised contractual schemes: capital allowances,

Co-ownership authorised contractual schemes: information requirements,

Co-ownership authorised contractual schemes: offshore funds,

Landfill tax: taxable disposals,

Air passenger duty: rates of duty from 1 April 2018,

Petroleum revenue tax: elections for oil fields to become non-taxable,

Gaming duty: rates,

Remote gaming duty: freeplay

Tobacco products manufacturing machinery: licensing scheme

Fulfilment businesses

The fulfilment businesses changes clauses 108 to 119  being.Carrying on a third country goods fulfilment business, Requirement for approval, Register of approved persons, Regulations relating to approval, registration etc., Disclosure of information by HMRC, .Offence, Forfeiture, .Penalties, Appeals, Regulations. Interpretation and Commencement

Other clauses and schedules removed

These relate to Enquiries .Partial closure notices, Avoidance, Customs enforcement powers, Data-gathering from money service businesses and Northern Ireland welfare payments: updating statutory reference

The schedules excluding those highlighted earlier that have been removed are:

Schedule 8 Social investment tax relief

Schedule 10 Corporate interest restriction

Schedule 11 Relief for production of museum and gallery exhibitions

Schedule 12 Trading profits taxable at the Northern Ireland rate

Schedule 13 Deemed domicile: income tax and capital gains tax

Schedule 14 Settlements and transfer of assets abroad: value of benefits

Schedule 15 Inheritance tax on overseas property representing UK

residential property

Schedule 17 Employment income provided through third parties: loans etc

outstanding on 5 April 2019

Schedule 18 Trading income provided through third parties: loans etc

outstanding on 5 April 2019

Schedule 24 Third country goods fulfilment businesses: penalty

Schedule 26 Partial closure notices

Schedule 27 Penalties for enablers of defeated tax avoidance

Schedule 28 Disclosure of tax avoidance schemes: VAT and other indirect

taxes

Schedule 29 Requirement to correct certain offshore tax non-compliance

We will see which clauses reappear in any Finance Bill later this year or early next year.

You can see more here and here

Article from ACCA In Practice