The draft clauses for the Finance Bill 2017 are due to be released on Monday 5 December, on what tax geeks now call “L-Day”.
AccountingWEB will be paying close attention to what is published and offers the following pointers to the devils which may be hidden in the detail.
VAT flat rate
Our own VAT expert Neil Warren will analyse the draft VAT regulations when they appear. The big question we all need answers to is; what will the VAT rules classify as ‘goods’ or ‘services’ for defining who is a ‘limited cost trader’? As those unfortunate businesses will have to use the new FRS percentage of 16.5%.
Employee share schemes
The third major surprise in the Autumn Statement was the proposal to cut back the money purchase annual allowance (MPAA) from £10,000 to £4,000 with effect from 6 April 2017. The function of the MPAA is to discourage pensions recycling by people who have been able to flexi-access their defined contribution pension pots since April 2015. This proposal has been introduced as a Treasury consultation, and it may not need any detailed legislation to implement.
The Autumn Statement contained an indirect reference to the proposed changes to the IR35 rules for public sector contracts, called ‘off-payroll working rules’. As FreeAgent reported, the proposals are going to go ahead but it will be worse than we feared as the 5% allowance for expenses will not be permitted as a deduction from the invoiced amount.
The change in emphasis of who makes the decision about IR35 for public sector contracts (customer or agent rather than personal service company), will also have implications for auditors of public sectors bodies. This may require an amendment to the Companies Act 2006. We will expand on this point when the draft legislation is published.
Other tax measures
The professional bodies have been working overtime responding to detailed tax consultations to ensure the draft Finance Bill 2017 clauses work in the way the government intended and don’t cause any further foul-ups with unintended consequences. Among the other changes we expect to see on L-Day are:
The future of salary sacrifice for benefits in kind is in the balance as Kate Upcraft explained. There are also moves to change the taxable benefit charges for low emissions company cars, and reform the taxation of termination payments. Further simplifications to the PAYE settlements agreements process will be introduced and the rules for when the employee repays the employer the value of the benefit will be rationalised.
This term refers to individuals and businesses who hide completely from the tax system. HMRC will have the power to gather bulk data from money service businesses, such as cheque cashers and currency exchange services, to track cash which is not being declared as earnings. Another tool to track non-compliant businesses is to make any licences, such as to sell alcohol, conditional on the business being registered with HMRC.
This levy on soft drinks is due to take effect from April 2018. However, the food industry is already changing its recipes to avoid the new levy, so this new tax may achieve its aim of reducing childhood obesity without raising any revenue.
No Budget or Autumn Statement would be complete without the announcement of a raft of tax avoidance measures. We should expect more detail on:
- VAT penalty for participating in tax fraud
- Penalties for accountants and others who enable defeated tax avoidance schemes
- Requirement to correct past offshore tax non-compliance
- Tax charges to discourage disguised remuneration including a charge on employee loans which have not been repaid by 2019 and were legal at the time they were advanced
- The remittance basis used by non doms will be restricted to individuals who were born outside of the UK and who have been tax-resident in the UK for less than 15 years
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.