On 6 July, the government published 40 draft Finance Bill clauses and 8 schedules for consultation which runs until 31 August 2018, together with explanatory notes and 14 consultation responses.
The draft Finance Bill has 4 clauses which have an immediate or retrospective effect, these being income tax exemptions for emergency vehicles, exemption for workplace charging of battery vehicles, amendments to corporate interest restriction rules and corporation tax relief for carried-forward losses.
Some of the other key areas covered in these documents include:
1. Reforms to Entrepreneurs’ Relief (ER)
As previously trailed in the Budget there is an issue regarding dilution of a qualifying shareholding below 5% where, for example, additional shares are issued following a financing round, may jeopardise the ability to claim ER and benefit from a 10% CGT rate on disposal of those shares.
Following consultation, the draft legislation confirms that from 6 April 2019 an individual may make an election to be treated as disposing of their shares at the date that the qualifying conditions would cease to be met, and may make a further election to defer the gain until such time as the shares are actually sold.
2. Property taxation – tighter deadlines for payment of capital gains and stamp duty
The draft Finance Bill drastically substantially reduces the payment window for capital gains tax on residential property by UK residents to 30 days after completion, starting in April 2020. For non-UK residents where these measures are already in place for the disposal of UK property, the reporting requirement will be expanded to include all companies from April 2019.
The stamp duty payment deadline is being cut from 30 days to 14 days for transactions made from 1 March 2019.
3. Tax administration and avoidance
Legislation is incorporated into the draft Finance Bill to increase the tax assessment time limit for non-deliberate offshore non-compliance to 12 years for income tax, IHT and CGT. The 20 year window will remain for deliberate tax evasion. The amendments will come into play from date of Royal Assent and will not be retrospective.
The Government has also decided to introduce a new late filing regime which will replace the existing late submission penalties with a points based system. The new system will be applicable to as many taxes with regular filing obligations as possible (including Making Tax Digital regular updates). From a VAT perspective, these sanctions are designed to replace the current default surcharge regime. Alongside this change there will be an amended penalty system for deliberately withholding information from HMRC as well as a new penalty model for late payment of tax.
4. VAT treatment of vouchers
New legislation has been published as part of the draft Finance Bill that aims to change the VAT treatment of vouchers. The legislation will focus on bringing the UK VAT treatment of vouchers in line with that published in the EU directive.
The new legislation is not concerned with the scope of VAT and whether VAT is due, but with the question of when VAT is due and, in the case of multi-purpose vouchers, the consideration upon which any VAT is payable. The changes will apply to any vouchers issued on, or after, 1 January 2019 and will introduce a common VAT treatment of vouchers across the EU.
The new rules will see a consistent approach to the VAT treatment of vouchers especially those that involve more complex scenarios: where vouchers can be used in the UK and across the EU. This will help ensure that the correct amount of VAT is charged irrespective of the payment method used. This in turn will help stop the double-taxation or non-taxation of goods or services purchased with the use of a voucher.
HMRC have confirmed that they will take a pragmatic approach to businesses experiencing any difficulties complying with the new rules especially as the changes will be implemented over the busy Christmas holiday period.
5. Employment taxes
The draft Finance Bill confirms that from 6 April 2018 that there will be no income tax or NIC charge for employees who charge their own electric or hybrid vehicles at or near their workplace.
The legislation also seeks to address two anomalies within the current optional remuneration arrangement rules. At present the connected costs of providing the vehicle, such as insurance, are ignored. Further, the capital contributions made by the employee to the cost of the car can be overstated, as that amount is not apportioned over the tax year. These anomalies will be removed from 6 April 2019.
Next steps
Whilst the draft act is helpful from a tax planning perspective, we are still awaiting a date for this year’s Budget which will no doubt give updates on items not included in these documents such as the further Government thinking on taxing the digitalising economy and the tax treatment of intangible fixed assets held by corporates.
Should have any questions relating to the draft Finance Bill then please do not hesitate to contact your usual Ryecroft Glenton adviser.