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Legislation Day 2016 highlights

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6th Dec 2016
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After a lightweight Autumn Statement the Treasury quietly slipped out 398 pages of Finance Bill 2017 draft provisions on Monday afternoon.

The draft legislation, which includes a further 287 pages of draft explanatory notes for Finance Bill 2017, delivers the detail on headline announcements made last month on a raft of tax changes including IR35 reform and changes to the VAT flat rate scheme.

As the AccountingWEB team starts to digest the draft provisions for Finance Bill 2017, this article tackles some of the highlights.

The consultation on the draft legislation runs up until 1 February 2017 with final details being confirmed in Budget 2017 and legislation introduced in the corresponding Finance Bill to be released in late March 2017.

IR35

New rules on public sector intermediaries will apply to contracts entered into before 6 April 2017. If work is completed before 6 April 2017 but payment made on or after 6 April 2017 it will be within the new legislation.

The draft legislation features a large volume of notes and examples on this.

On public sector IR35 reform, Seb Maley of Qdos, said HMRC had thrown “a bit of a curveball” by putting responsibility on public sector bodies rather than agencies.

Check back on AccountingWEB in the coming days for a detailed analysis on this topic.

Making Tax Digital

On Making Tax Digital (MTD) HMRC has outlined the response numbers in more detail.

Falling short of giving precise numbers the Revenue confirmed the total consultation document responses were more than 5,200, including:

  • More than 3,000 participants in webinars and face-to-face events
  • More than 1,200 to its online survey
  • More than 600 to Bringing Business Tax into the Digital Age and Voluntary Pay-As-You-Go
  • More than 120 to Tax Administration
  • More than 200 to Cash Accounting
  • More than 80 to Making Better Use of Information

VAT FRS

Changes to the VAT flat rate scheme will be made by secondary legislation, i.e. regulations, which has been published today.

Rebecca Cave said the phrase “applies to labour only businesses” included in the TIIN was interesting as this may mean the adjustments to the FRS won’t apply to service-related businesses such as journalists, architects or engineers.

VAT expert Neil Warren will be covering this topic in greater detail later this week.

Personal allowance

The personal allowance will not be tied to the level of national minimum wage (30 hours X NMW = PA) as George Osborne had promised, but it will be indexed by inflation (CPI) when it reaches £12,500.

Company car confusion

Some complex bands will be introduced for electric company cars  which will depend on mileage range of the vehicle. These will apply from 2020/21.

Disguised remuneration

The draft provisions included a new charge on disguised remuneration loans that were made after 5 April 1999 and remain outstanding on 5 April 2019.

For the self-employed there’s a new charge on outstanding disguised remuneration loans.

There is also a move to prevent employers claiming a deduction when computing their taxable profits for contributions to a disguised remuneration scheme unless income tax and NICs are paid within a specified period.

Foreign pensions clampdown

On foreign pensions the draft clauses include extending from five to 10 tax years the UK’s taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief.

It also includes closing specialist pension schemes for those employed abroad (section 615 schemes) to new saving.

NICs shake up

From 2018 class 2 NICs will be abolished while classes 3 & 4 NIC will allow access to contributory benefits.

Termination payments will be subject to NIC above £30,000 for employees and employers.

Non-doms rules

Rules around the taxation of non-domiciles are being tightened up. The following will be deemed domiciled from 6 April 2017:

(a) resident in the UK for 15 of the past 20 tax years; or

(b) if they are born in the UK with a UK domicile of origin

Also property held through overseas vehicles will be subject to IHT.

The Business Investment Relief (BIR) scheme will also be expanded.

ATED 

Rates for 2017/18 have been published. These show only small increases on the 2016/17 rates, which were frozen at 2015/16 levels, except for the lowest band (£500,000 to £1m).

SITR

The conditions for an organisation to meet to qualify for social investment tax relief (SITR) will be tightened up from 6 April 2017.

The new conditions will:

  • reduce the limit on full-time equivalent employees to below 250 employees
  • exclude certain activities, including asset leasing and on-lending
  • exclude investment in nursing homes and residential care homes, but this may be amended again the in future
  • exclude the use of money raised under the SITR to pay off existing loans

Also individuals will only be eligible to claim tax relief under the SITR only if they are independent from the social enterprise.

Substantial shareholdings exemption

The conditions for the substantial shareholdings exemption (SSE) will be relaxed from 1 April 2017 for following:

  • remove the condition that the investing company is required to be a trading company or part of a trading group
  • extend condition that the shares must have been held for at least 12 months in the two years preceding the sale, to 12 months in the six years preceding the sale
  • withdraw the condition that the company in which the shares are sold continues to be a qualifying company immediately after the sale, unless the sale is to a connected party
  • for qualifying Institutional Investors (on a defined list), the condition that the investee company in is a trading company will be been removed

Tax enquiries

Both taxpayer and HMRC will be able to apply for closure of discrete issues in complex enquiries. The original proposal was that only HMRC would be able to do this, so this is a minor victory for the taxpayer and will apply to all current and future tax enquiries.

Hidden economy

The proposal that granting licences (eg to sell alcohol) must be conditional on registering with HMRC are to be co-ordinated with Making Tax Digital.

Penalties for businesses who don’t register with HMRC are to be strengthened, but more details are expected to be revealed in Spring Budget 2017.

Draft legislation will be released for penalities relating to money service businesses.

 

What’s your initial impression of the draft provisions?

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Replies (5)

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By AndrewV12
07th Dec 2016 10:51

Extract above
VAT FRS
'Changes to the VAT flat rate scheme will be made by secondary legislation, i.e. regulations, which has been published today.

'Rebecca Cave said the phrase “applies to labour only businesses” included in the TIIN was interesting as this may mean the adjustments to the FRS won’t apply to service-related businesses such as journalists, architects or engineers.'

Good news its going in the right direction, keep going.

Thanks (1)
By Marion Hayes
07th Dec 2016 14:36

Re VAT FRS - where does it say Labour only?
I have looked at explanatory note, and draft legislation, and the Impact note and all I can see is that labour only businesses are an example of a restricted trader, not that only labour only traders are affected.

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Replying to Marion Hayes:
Head of woman
By Rebecca Cave
07th Dec 2016 15:52

I think the phrase "labour only" was taken out of the guidance. I certainly saw it there on Monday, but by Tuesday it was gone.

Thanks (0)
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By lme
07th Dec 2016 17:34

Great summary - really useful thank you. Nightmare on electric company car tax, why on earth do they have to make it so complicated? Who on EARTH advises the government to make such ridiculously complex laws or do they do it all on their own?

Thanks (0)
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By Vince54
08th Dec 2016 11:35

Re "NICs Shakeup", I thought it is only employers who will pay NICs on termination payments in excess of £30k?

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