Several anti-avoidance measures mentioned by the Chancellor in his Autumn Statement took immediate effect from 5 December, the date of his speech.
In a separate ministerial statement issued the same day, Exchequer secretary to the Treasury David Gauke (right) informed Parliament that the following measures to be included in the Finance Bill 2013 will apply immediately. The retrospective tweaks are allowed under a protocol for announcements made outside scheduled fiscal events set out in last year’s Budget, he explained.
The avoidance measures concerned are:
- Bank Levy – double taxation relief - as part of his “we’re all in this together” theme, the Chancellor emphasised that the banks would not be able to enjoy the reduction in the corporation tax rate to 21% in 2014, as the Bank Levy rate would be increased to 0.130% next year. In a further move to increase the tax take from this sector, foreign bank levies will not now be allowable deduction for income tax or corporation tax purposes. Finance Bill 2013 clauses will prevent companies claiming double taxation relief for a foreign bank levy against the UK Bank Levy.
- Tax mismatch schemes - corporation tax avoidance schemes designed to exploit asymmetric tax treatments for loans or derivatives will be blocked, including those involving companies that are members of a partnership. - Such tax mismatch schemes have been the focus for a lot of recent activity at HMRC and the use of partnerships and similar collective structures will be one of the areas addressed in the planned review of high risk areas for tax evasion.
- Property total return swaps - More Finance Bill clauses are on the way to block schemes that use property return swaps to convert capital losses within a group into income losses, so that the capital gains which are not in proportion to those actually arising from the swap contract.
- Manufactured payments - schemes where companies lends stock and receive some non-taxable item or service in return will be blocked. The draft legislation will hold the lender to be liable for tax when anything carrying a value is received in return for a manufactured payment.
- Payments of patent royalties - Tax relief will be abolished for non-trade payments of patent royalties. This legislation is presented partly as a simplification measure and is designed to close down an avoidance scheme that exploits this relief. As intellectual property tax expert Anne Fairpo noted, how many people out there hold patents and receive royalties that are not trade-related?
Follow the headline links above for draft legislation and explanatory notes on each of these measures. More legislation and information notes will be published for consultation on the Treasury's Finance Bill 2013 page on 11 December.
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