With this year’s first Finance Bill blown apart by pre-election purdah, its summer successor is expected to provide long-awaited details on a wide variety of proposals, including non-doms and Making Tax Digital.
While tax advisers and taxpayers alike have had precious little policy detail to chew on in recent months, last week’s Queen’s Speech heralded three Finance Bills over the course of the next two years to provide the legislative backbone to Budget decisions.
First up will be the Summer Finance Bill, which is expected to sweep up the majority of measures cut in the pre-election wash-up caused by Theresa May’s failed election power play.
To the frustration of many, the Queen’s Speech was light on the specific measures the government intends to implement and the timescale on which they hope to do so. The background notes accompanying the speech state that the Summer Finance Bill 2017 will include “a range of tax measures including those to tackle avoidance,” but provided little else.
No date has been set for the Bill, but Parliament’s summer recess begins 20 July so it is likely to be sooner rather than later to allow adequate time to consider its contents.
John Cullinane, the Chartered Institute of Taxation’s tax policy director, was one of many industry commentators to ask for more detail around the Bill, calling for an urgent statement to “clarify the government’s intention on the proposals dropped from the pre-election Finance Bill”.
However, with no such statement forthcoming (at time of writing) what sorts of measures can we expect to see, and how much will remain from its predecessor?
Making Tax Digital
Having the legislation meant to underpin it dropped from the Finance Bill was just the latest setback to befall the government’s digital taxation project, which has been hampered by issues as diverse as the Panama Papers, the Brexit vote and a general election.
While a pilot project ticks along in the background to fine-tune the software requirements, the relative lack of detail around this complex mix of tax law and technology has left accountants, clients and commentators with many unanswered questions.
Reacting to the Queen’s Speech, RSM’s senior tax partner George Bull was the latest to voice apprehension that the time lost to delays will lead to implementation issues.
“We already know from many recent tribunal decisions that the legislation, and associated HMRC practices, is creaking under the strain of the existing system,” said Bull.
“In the debates on the Queen's speech, we therefore hope that MPs will challenge the ministers responsible for HMRC to explain why they are allowing inaccurate software to be used this year, and what they will do to guarantee that MTD will achieve its tax-raising objectives without imposing impossible and contradictory demands on businesses and individuals.”
While concerns about the project’s schedule have also been expressed in the Lords and the Treasury Select Committee, due to the government’s tax-raising objectives and the £1.2bn already committed to the project, many feel Summer Finance Bill 2017 will see MTD continue along on its current timetable.
Regardless of the timings, accountants will be looking to the bill to provide clarity and detail.
The decision to drop the proposed changes from the Finance Bill to the taxation of non-domiciled individuals in the pre-election wash-up surprised commentators for three main reasons, according to RSM’s George Bull.
Firstly, because the decision to withdraw the legislation, made on 24 April came after the date it was due to take effect – 6 April 2017.
Secondly, due to the above many non-doms had already taken action based on the draft legislation, by selling assets relying on a rebasing relief, and by bringing funds to the UK relying on a cleansing relief. Both reliefs have currently been withdrawn, potentially creating large tax bills for the people who relied on them.
And finally, because the legislation had been subject to a careful and extensive consultation.
While it may seem a simple matter for the government to reinstate the draft legislation in full with a commencement date of 6 April 2017, providing certainty to those who prepared for the introduction of this new legislation, a newly emboldened Labour Party may wish to reopen the debate on the legislation, potentially make it even tougher than it already is on non-doms.
For historical reasons, National Insurance changes are not included in the Finance Bill, and instead are subject to separate parliamentary procedures. Therefore a National Insurance Contributions Bill will arrive later this year, which is expected to legislate for NIC changes announced in Budget 2016 and Autumn Statement 2016
These changes are very likely to relate to the abolition of class 2 NIC and to ‘disguised remuneration’ and not to Philip Hammonds attempted reforms to class 4 NIC for the self-employed, which were abandoned shortly after this year’s Budget.
A separate Customs Bill will also be put forward to ensure that the UK has stand-alone regimes for Customs and VAT after its assumed exit from the European Union.
What measures would you like to see from the Summer Bill? Will it be an ‘all eyes on MTD’ affair, or should other priorities take precedence with Brexit looming large over the economic landscape?