The Finance Bill 2017-2018 is a refreshingly slim 190 pages, but it contains some significant tax proposals, which if passed will form the Finance Act 2018.
Why so slim?
Since Gordon Brown was Chancellor, tax professionals have become used to hefty Finance Bills arriving at least once a year. This Finance Bill 2017-2018 is the third Finance Bill presented to Parliament in 2017.
If MPs are getting a bit fed-up of sitting through yet another round of committee deliberations on tax matters, imagine what members of the professional bodies’ tax technical committees feel like. At least MPs get paid for the time they spend (or don’t spend) scrutinising the draft tax legislation, members of the accounting bodies technical committees are largely volunteers.
This Bill is remarkably slim at 50 clauses and 12 schedules extending to only 190 pages. This is because it is fairly light on new anti-avoidance rules (see Schedules 1 and 10), and the Chancellor has resisted the temptation to invent a new tax!
What’s in it?
The usual clauses to set the tax rates and allowances for 2018/19, although the corporation tax rate for the year beginning 1 April 2019 was already set at 19%. A welcome tweak to the marriage allowances is made to allow retrospective claims where one spouse or civil partner has died. This takes effect from 29 November 2017.
However, the same flexibility is not extended to divorced couples. If your clients are divorcing, and the conditions for the marriage allowance apply, encourage them to make a claim before the divorce is finalised. The marriage allowance can’t be claimed once the marriage has ended, even for earlier years when the couple were together.
The changes to SDLT for first-time buyers and the easing of the rules for the 3% supplement on additional homes are included at clauses 40 and 41, and Schedule 11. These take effect from 22 November 2017 and exclude from the SDLT rules properties in Wales from 1 April 2018, when the Welsh Land Transactions Tax (LTT) starts to apply. We await the reaction of the Welsh and Scottish Governments to these SDLT changes. Will Wales and Scotland mirror the land taxation break for first-time buyers, and if so up to what threshold?
An area that caught my eye is the amended powers for HMRC to enter premises and inspect goods, and the powers to search vehicles or vessels (boats). These powers relate to the enforcement of customs duties, which will be far more significant after the UK leaves the European Union.
HMRC officers will be able to use reasonable force to gain entry to a locked vehicle or vessel. They will also be able to enter business premises which is used to trade goods, at any reasonable time, and require the business owner or building occupier to provide assistance with that search, by say opening crates or unpacking goods.
Schedule 1 tweaks the rules on the loan charge which was legislated in F(no.2) A 2017. This charge comes into effect in 2019, and will impose tax and NIC on individuals who have not the repaid their “contractor loans” by 5 April 2019 or settled their tax position with HMRC. This schedule introduces new requirements for those individuals to provide information to HMRC about the loans they have received.
Part 2 of Schedule 1 introduces a “close company gateway” to catch payments which are made by a close company via a circular route through a third party, to benefit the owner/ directors of the company, and to avoid tax or NIC. Such payments will be treated as remuneration of the owner/director unless the payment can be shown to be part of a commercial transaction.
Schedule 10 contains new rules relating payments and benefits from offshore trusts, particularly where capital payments are made to non-residents.
What’s not there
You will search the Finance Bill in vain for any mention of digital tax reporting or MTD. All the functioning parts of the MTD rules will be contained in regulations, which will have far less scrutiny than the primary law.
We do have three new publications concerning MTD, which I will examine in detail in a later article. In brief, they are:
- Scope and pace review – this is a technical paper which restates the impacts of MTD and the expected increased tax revenue.
- Interest and sanctions for late payment – this is a consultation on options for aligning the rules on interest payments and penalties for late payment across income tax, corporation tax and VAT. MTD was not supposed to change the frequency or date of payment of taxes.
- The Government has also reacted to the earlier consultation on sanctions for late submission of MTD reports and has chosen the penalty points option.