The unprecedented occurrence of two finance bills issued in five days may suggest a plethora of new tax changes are on their way. In truth, few new measures have been revealed, but those that have been announced could have significant consequences for those affected.
Following a written statement by Financial Secretary to the Treasury, Mel Stride, on 6 September, the first draft clauses of Finance Bill 2018 were published on 13 September as ‘Finance Bill 2017 to 2018’; confusing in that they followed shortly after publication on 8 September of ‘Finance Bill 2017-19’, which will be enacted as Finance (No.2) Act 2017 later this year.
Whilst the draft Finance Bill 2018 clauses contain proposed legislation for eight new tax measures, Finance Bill 2017-19 contains largely unchanged clauses dropped from the foreshortened Finance Act 2017 passed before the 8 June general election - the limited changes mainly relate to tweaks announced in July to better reflect the government’s known intentions, but also include certain making tax digital provisions originally expected to be enacted in secondary legislation, which was subsequently issued on 13 September.
Although we anticipate further clauses to be added to Finance Bill 2018 following the Chancellor’s Budget on 22 November, the number of draft clauses issued so far hints at a shorter Finance Bill than those we have become accustomed to in recent years (Finance Bill 2017-19, for example, is the second longest Finance Bill on record at 674 pages). The new measures are as follows.
Partnership taxation: proposals to clarify tax treatment
Provisions aiming to remove uncertainty and provide clarity on the taxation of partnerships , including a change whereby profit allocations for tax purposes must be made on the same as basis as the allocation of commercial profits between partners, with fixed share partners required to bear a proportion of a partnership’s tax-disallowable expenditure based on their overall percentage of the firm’s profit.
Offshore trusts: anti-avoidance
New provisions to ensure payments and benefits from offshore trusts intended for UK resident individuals, but made via overseas beneficiaries or remittance basis users, are taxed from 6 April 2018. In this regard, benefits provided to a close family member of a UK resident settlor will be taxable as if received by the settlor and capital payments and benefits received by non-resident/non-domiciled individuals who gift them to a UK resident, will be taxable on the UK resident as if they had received them directly from the trust.
Tackling disguised remuneration: avoidance schemes
The ‘close company gateway’ that had been deferred to allow amendments to safeguard normal commercial transactions is reintroduced to ensure that disguised remuneration rules apply equally to owners of close companies as they do for other employees.
New requirements are also set out for trustees and employees impacted by the PAYE charge on loans outstanding on 5 April 2019 to employee benefit trusts and similar arrangements, to report outstanding loan balances to the employer and to HMRC. We await legislation covering how responsibility for payment of the tax may shift from the employer to the employee in some cases.
Termination payments: removal of foreign service relief
A measure removing foreign service relief, with effect from 6 April 2018, for termination payments to employees (other than seafarers) who are UK tax resident in the tax year their employment terminates. Employers should review their termination payment and reporting policies accordingly.
Income tax: debt traded on a multilateral trading facility
A new exemption from withholding tax on interest for debt traded on a multilateral facility operated by a recognised stock exchange regulated in a European Economic Area (EEA) territory.
Pensions tax registration
Measures giving HMRC new powers to register and de-register master trust pension schemes to help in the fight against pensions fraud by restricting tax registration to those pension schemes providing legitimate pension benefits.
Landfill tax: disposals not made at landfill sites
An extension to the scope of landfill tax to include waste disposal at sites that do not have an environmental disposal permit.
Bank levy: changes to scope and administration
A previously trailed measure that limits the Bank Levy to UK activities.
Whilst it remains to be seen whether further measures will significantly add to the size of draft Finance Bill 2018, the legislation that has been published could require early action by those affected to address the impact on them. If you believe you will be affected by these changes, please speak to your usual RSM tax contact.
For more information please get in touch with David Barton, or your usual RSM contact.