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:
- Life insurance policies: recalculating gains on part surrenders etc
- Personal portfolio bonds
- EIS and SEIS: the no pre-arranged exits requirement
- VCTs: follow-on funding
- VCTs: exchange of non-qualifying shares and securities
- Social investment tax relief and Business investment relief
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”.
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.
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:
- Carried-forward losses
- Losses: counteraction of avoidance arrangements
- Corporate interest restriction
- Museum and gallery exhibitions
- Grassroots sport
- Profits from the exploitation of patents: cost-sharing arrangements
- Permitted taxable periods of payees and deductions for amortisation
- Trading profits taxable at the Northern Ireland rate
The following chargeable gains changes clauses 37 to 40 were all removed:
- Exemption from attribution of carried interest gains
- Elections in relation to assets appropriated to trading stock
- Substantial shareholding exemption
- Substantial shareholding exemption: institutional investors
Provisions relating to more than one tax: domicile, overseas property etc
The following chargeable gains changes clauses 41 to 44 were all removed:
- Deemed domicile: income tax and capital gains tax
- Deemed domicile: inheritance tax
- Settlements and transfer of assets abroad: value of benefits
- Inheritance tax on overseas property representing UK residential property
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
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:
outstanding on 5 April 2019
outstanding on 5 April 2019
We will see which clauses reappear in any Finance Bill later this year or early next year.
Article from ACCA In Practice