The largest Finance Bill in history has been shrunk in the “wash-up” before Parliament is dissolved for the General Election. The scrapped clauses include those which impose digital reporting and record keeping for MTD.
This is the term for the last few days of a Parliament before the dissolution prior to a General Election. Public Bills cannot be carried forward into a new Parliament, so they must be passed or scrapped.
The Finance Bill is too important to be abandoned, so the opposition parties and the Government must come to an agreement as to which clauses to pass and which to drop. Normally only the non-contentious clauses survive to be passed into law as part of a much slimmer Finance Act.
The majority of the Finance Bill has been cut from the version of the Bill which will pass its committee and report stages in the House of Commons on 25 April, and be read by the House of Lords on 26 April 2017. No amendments of the Bill can be made once it has passed its report stage in the House of Commons. The Finance Bill is expected to receive Royal Assent to become Finance Act 2017 by 28 April.
The CIOT has produced a handy list of what is in or out of the Finance Bill. The abandoned clauses include:
- Digital reporting and record keeping (MTD) for income tax and VAT
- Dividend tax rate for 2018/19
- £1000 tax free allowances for property and sundry income
- £500 tax free pensions advice
- Changes to taxation of terminations payments
- Reduction in money purchase annual allowance from £10,000 to £4000
- Power to tax capital gains made from UK land as income tax not CGT
- Deemed domicile for all taxes for non-doms
- Changes to substantial shareholding exemption
- Changes to EIS, SEIS, SITR and VCT schemes
- Restrictions on corporation tax losses
- Tax relief for cost of Museum exhibitions
- VAT in relation to goods stored in UK warehouses
The following significant provisions remain in the draft Bill:
- Income tax rates for 2017/18
- Corporation tax rate for 2018
- Air passenger duty rates for 2017
- Insurance premium tax rates from June 2017
- IR35 for the public sector
- VED duty rates from April 2017
- Alcohol and tobacco duty rates
- Soft drinks levy
- Changes to salary sacrifice schemes
- Deduction of tax at source
- Abolition of Employer Shareholder Scheme
Note the IR35 provisions for workers performing contracts in the public sector remains in the Bill, although it is a contentious and badly drafted piece of law.
What happens now?
This is not the end of MTD, and it may not even delay its implementation. The provisions taken out of the Finance Bill 2017 are merely deferred, and are likely to be reintroduced in a very similar form when Parliament resumes after the General Election. However, that does depend on which Party is able to form the next Government.
If you are concerned about MTD you have an ideal opportunity to quiz your prospective parliamentary candidates about it during the General Election campaign.