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Heads down: Finance Bill 2012 draft clauses released

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6th Dec 2011
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At 11am this morning the Treasury published a package of draft clauses for the 2012 Finance Bill on its website. This is the administrative follow-up to the Chancellor's Autumn Statement last week, but under the government's new approach to tax policy making the volume of draft clauses has expanded to near-Budget proportions.

The published clauses represent a “majority” of the Finance Bill 2012, according to Exchequer Secretary to the Treasury. Publishing such an extensive preview ahead of the spring budget and summer Finance Act provides ample time for the announcements to be considered and reviewed by interested parties and ensures “stability and certainty in the UK tax system for all”, the minister said in an exclusive interview with TAXtv (follow link to view the full interview).

The Finance Bill clauses focus on areas covered in summer consultations, with the exception of the statutory residence test, which was expected to be announced following consultation earlier in the year. Gauke confirmed that the statutory residence test would be delayed for 12 months because there were “difficult issues to address”. The Chancellor will set out the next steps in the spring Budget. The increased domicile remittance charge of £50,000 will come into effect in 2012, as will a statutory version of the ESC C16 concession for taking money out of struck-off companies - but with a new £25,000 limit.

Business tax highlights

  • Incentives for entrepreneurs - including the Seed Enterprise Investment Scheme (SEIS) that will extend 50% tax relief to individuals who invest up to £100,000 to companies with 25 or fewer employees holding assets of up to £200,000. Conditions will ensure the scheme applies to “genuine new ventures” and will be restricted to those holding a stake of less than 30% in the company.
  • Capital allowances changes including rules making allowances for fixtures passed to a new own dependent on pooling relevant expenditure prior to the transfer and agreeing a value within two years. Full 100% first year allowances will be made available for companies investing in plant and machinery in six enterprise zones - but controversially not the other 15 that have been created. 
  • Extra statutory concession C16 - legislative changes taking effect from 1 March 2012 will put the informal extra statutory concession (ESC) C16 on a statutory basis, and set the amount that can be distributed without being subject to income tax at £25,000.

Ernst & Young's tax team counted more than 1,107 pages of draft clauses and explanatory notes in the 6 December legislative avalanche, but E&Y head of tax policy Chris Sanger welcomed the new approach both for its openness and for the Treasury's apparent willingness to listen to constructive criticisms during the consultation process. “Today’s publication of the draft legislation of the Finance Bill, together with formal responses to consultations, marks a high point in engagement on tax policy,” he said.  “In the drafts published today, the government has adopted a range of sensible changes that will make their policies more effective.”

There's a lot to wade through; as the week progresses, AccountingWEB's team will present the key measures for small/medium businesses and their advisers. More detailed coverage can be found in our Finance Bill 2012-at-a-glance guide and the AccountingWEB Finance Bill 2012 tag page. Here are the measures being lined up:

Personal tax

  • Income tax rates, rate limits and personal allowances for 2011-12
  • Seed investment scheme 
  • Enterprise Investment Scheme and Venture Capital Trusts 
  • Tax-advantaged venture capital schemes: consultation response 
  • Reform of the taxation of non-domiciled individuals
  • Capital gains tax: foreign currency bank accounts
  • Reform of the taxation of non-domiciled individuals: consultation response 
  • Inheritance tax nil rate band: switch to CPI
  • Capital gains tax: annual exempt amount) 
  • Single payment and capital gains tax roll-over relief 
  • Tax exemptions: international military headquarters, EU forces, etc 
  • Income tax exemption: armed forces continuity of education allowance 
  • Company car tax: security enhanced cars
  • Taxation of non-residents: Champions League final 2013  
  • Qualifying time deposits: deduction of tax at source 

Corporation tax

  • Changes confirmed for main rate for 2013, small profits rate for 2012
  • Full reform of controlled foreign companies rules 
  • Controlled foreign companies reform: consultation response
  • Corporation tax reform: patent box 
  • Research and development tax relief 
  • Enterprise zones: first year allowances for designated areas 
  • Capital allowances for fixtures 
  • Improvements to the real estate investment trust regime 
  • Tax transparent investment funds 
  • Bank levy rate and amendments 
  • Solvency II and the taxation of insurance companies 
  • Life insurance companies: a new corporate tax regime: consultation response 
  • General insurance: claims equalisation reserves 
  • Lloyds stop-loss insurance 
  • Company distributions 
  • Amendments to the tax treatment of financing costs and income (debt cap)
  • Debt cap: consultation response 
  • Changes to UK generally accepted accounting practice 
  • Supplementary charge: restriction on decommissioning tax relief/scope of supplementary charge
  • Revision of ESC C16 to allow pre-strike off capital distributions of up to  £25,000.

Charities

  • Gifts of pre-eminent objects to the nation 
  • Inheritance tax: reduced rate for estates leaving 10% or more to charity 
  • A new incentive for charitable legacies: consultation response 
  • In-year repayments of income tax to charities 
  • Self assessment donate 
Indirect tax
  • VAT: low value consignment relief 
  • VAT: cost sharing exemption 
  • VAT: cost sharing exemption: consultation response 
  • Tackling VAT evasion on road vehicles brought into the UK 
  • VAT: online registration and removal of the threshold for non-UK established businesses 
  • VAT: consultation on the next steps for moving VAT online: consultation response 
  • VAT: grouping extra statutory concession 
  • VAT: treatment of public bodies
  • Stamp duty land tax and stamp duty: relief for National Health Service bodies
  • Machine games duty
  • Gambling duties: double taxation relief 
  • Repeal of section 22 of the Alcoholic Liquor Duties Act 1979 (ALDA) 
  • Reform of air passenger duty
Green taxes
  • Carbon price support rates
  • Climate change levy: change to the reduced rate on electricity; metal recycling processes
  • Climate change levy: reform of climate change agreements
  • Climate change levy: electricity produced in combined heat and power stations
  • Capital allowances: feed-in tariffs and the renewable heat incentive

Anti-avoidance

  • Capital allowances: anti-avoidance rules for plant and machinery 
  • Changes to the capital allowance anti-avoidance rules for plant and machinery: consultation response
  • Stamp duty: disclosure of tax anti avoidance schemes
  • Manufactured overseas dividends
Tax administration
  • Working with tax agents - dishonest conduct: response document 
  • Information powers 
  • PAYE regulations: information 
  • Tax agents: dishonest conduct 
  • Tax agreement between the United Kingdom and Switzerland 
  • Incapacitated persons: a modern approach 
Tax simplification measures
  • Removal of 36 tax reliefs: consultation response, plus a bunch of miscellany ranging from mineral royalties to stamp duty and even luncheon vouchers.
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