Draft Finance Bill 2017-2018
Despite the Chancellor’s stated intention to improve the Finance Bill cycle, the Winter Finance Bill, published on 13 September, proved to be a bit of a token effort. Only a small proportion of the expected legislation was published – the final Finance Bill for 2018 is likely to be much larger.
Nonetheless, the draft rules that were published will have a significant impact on the taxpayers they affect. We have analysed each of the key proposals in order to provide insight into who may be affected and how. Please scroll down for more information.
The Budget and Finance Bill
The proposals were published in the Draft Finance Bill 2017-18 to allow for technical consultation ahead of the Budget on 22 November 2017.
We now understand that the Government will publish the full Finance Bill 2017-18 following the Budget, with the timing expected to be much the same as in previous years.
We will provide detailed analysis of the Budget and the Finance Bill when they are published.
Measures published on 13 September 2017
Withholding tax on interest
In order to increase the competitiveness of the UK debt markets, Winter Draft Finance Bill 2017 to 2018 includes an exemption from withholding tax on interest arising on debt traded on a Multilateral Trading Facility operated by an EEA-regulated recognised stock exchange. This is achieved by extending the definition of a quoted Eurobond. The change will have effect for interest payments made on or after 1 April 2018.
In addition the definition of alternative finance investment bonds (AFIBs), which applies to Sharia compliant financial instruments, has been widened to include securities admitted to trading on a Multilateral Trading Facility operated by an EEA-regulated recognised stock exchange. Amendments in relation to AFIBs will have effect for corporation tax purposes for accounting periods beginning on or after 1 April 2018 and for income tax purposes for the tax year 2018-19 and subsequent years.
HMRC Consultation on Business Risk Reviews for large businesses
Alongside the draft Finance Bill, HMRC has published a consultation on changing its Business Risk Reviews for large businesses. The aim is make the Business Risk Reviews more precise to help improve tax compliance.
Future Bank Levy Changes
Draft legislation has been published on simplifying administration of the Bank Levy from 2018 and reducing the scope and rate of the levy in 2021.
Reform of partnership taxation
Some partnerships may have to reconsider long-established profit sharing arrangements as a result of draft legislation reforms to partnership taxation, published by HMRC. The good news is HMRC has listened to concerns and scaled back many of the original proposals.
Changes for Non-UK Domiciliaries
After a further period of uncertainty, with the removal of the draft legislation affecting the taxation of non-UK domiciled individuals from the March Finance Bill 2017, followed by the extraordinary General Election and repercussions that now brings, the Government have now published a second Finance Bill 2017 reintroducing the removed provisions. This is confirmation that they will be effective from the original commencement date of 6 April 2017.
Landfill Tax – illegal waste sites
Following a consultation earlier this year, the Government has published draft legislation to extend the scope of Landfill Tax to disposals made at illegal waste sites. The tax will be payable by anyone disposing of waste on a site without an environmental disposal permit and anyone who knowingly facilitates that disposal.
HMRC plans to fund additional staff to enforce this change and says it will work closely with the Environment Agency to share information about illegal sites.
Finally, another planned Landfill Tax measure from the Summer Finance Bill has been rolled over into the Winter Draft Finance Bill 2017 to 2018. The ‘taxable disposal’ for Landfill Tax purposes will be redefined so that any material disposed of at a landfill site will be taxable unless expressly exempt. Both changes will come into force on 1 April 2018.
Making Tax Digital: Digital reporting and record keeping for VAT
HMRC has now published a draft of the legislation that will implement Making Tax Digital for VAT. This has been offered for consultation in advance of the planned introduction of the requirements on 1 April 2019.
Termination payments – removal of foreign service relief
Employers will need to understand the implications of this change to the tax treatment of termination payments. This will be particularly true if they have internationally mobile staff or are considering employment terminations on or after 6 April 2018.
To support HMRC’s ongoing efforts “to tackle disguised remuneration tax avoidance schemes” two new provisions have been published. The first extends the existing rules to close companies. The second introduces a new reporting requirement in relation to loans. There will also be a settlement opportunity for affected taxpayers.