© Crown copyright 2016
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: firstname.lastname@example.org.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/finance-bill-2017-draft-legislation-overview-documents/overview-of-legislation-in-draft
This document provides an overview of legislative changes to tax law which the government plans to introduce in Finance Bill 2017, in secondary legislation, and (in some cases) in future Finance Bills. It also covers a small number of non-legislative announcements that will be of interest to tax professionals. It includes changes arising from announcements on 23 November at Autumn Statement 2016, and Budget 2016, where not already enacted.
This document provides a short summary of all tax measures, an indication of what consultation has been done on these changes to date, and whether or not the tax information and impact note (TIIN) has been published on 5 December 2016. If draft legislation is published for consultation, or there is a response document, this is also shown with a link at the end of the paragraph.
Details are also given of those measures where legislation was published on 23 November 2016.
New fiscal event timetable
Autumn Statement 2016 announced that the government would move towards having one main annual fiscal event. After the spring 2017 Budget, Budgets will be delivered in the autumn with the first one taking place in autumn 2017. The Office for Budget Responsibility will produce a spring forecast from spring 2018 and the government will make a Spring Statement responding to that forecast.
Making the transition to the new timetable will require adjustments to the normal tax policy making process due to the shorter interval between the 2 Budgets. Arrangements will be decided individually for different policies and set out to stakeholders by HM Revenue and Customs (HMRC). In the normal way, these will where possible provide for consultation on policy proposals and on draft legislation.
Consultation on draft legislation
The government has committed to confirming the majority of measures for inclusion in the Finance Bill at least 3 months prior to introduction of the Bill itself and, where possible, to publish draft legislation for each of these measures. This provides taxpayers with certainty about future planned tax changes and allows time for pre-legislative scrutiny. The majority of the draft legislation and explanatory notes for Finance Bill 2017 have been published alongside this document.
The consultation on draft provisions is intended to ensure that the legislation works as intended.
The final contents of Finance Bill 2017 will be subject to confirmation at the spring Budget 2017.
Many of the measures covered in this document were first announced at Budget 2016 and consultations on policy have been carried out over the spring and summer. The government has published a number of responses to these consultations alongside this document.
What has been published?
The government has published draft provisions for Finance Bill 2017 for consultation. The provision number is given at the end of each paragraph in the ‘Information about changes to tax legislation’ section if there is draft legislation in Finance Bill 2017. Where secondary legislation will give substantive effect to the Finance Bill provision, this has also been published in draft.
Each provision is accompanied by:
- a TIIN which sets out what the legislation seeks to achieve, why the government is undertaking the change and a summary of the expected impacts
- an explanatory note which provides a more detailed guide to the legislation
This material is published on the GOV.UK website.
The government’s responses to most of the policy consultations carried out over the summer have also been published on the GOV.UK website.
Contacts and closing date
If you wish to comment on any of the draft provisions, please use the contact details provided at the end of the relevant explanatory note. The closing date for comments is 1 February 2017, unless stated otherwise.
Information about changes to tax legislation
1. Direct taxes
1.1. Personal Allowance and the higher rate threshold
As announced at Autumn Statement 2016, the government will raise the Income Tax Personal Allowance to £12,500, and the higher rate threshold to £50,000, by the end of this Parliament. Next year, the Personal Allowance will rise to £11,500 and the higher rate threshold to £45,000.
1.2. Deduction of Income Tax at source from savings income
As announced at Budget 2016, the government will legislate in Finance Bill 2017 to remove the requirement for tax to be deducted at source from interest distributions of open-ended investment companies, authorised unit trusts and investment trust companies, and from interest on peer-to-peer loans. The changes will take effect from 6 April 2017. This will bring these types of savings income into line with the treatment of interest paid on bank and building society accounts.
A response document has been published.
Draft legislation (provision 12) and a TIIN has been published on 5 December 2016.
1.3. Retaining the band for the starting rate of savings Income Tax
As announced at Autumn Statement 2016, the government will retain the limit for the 0% starting rate for savings at its current level of £5,000 for 2017 to 2018.
1.4. Indexing the Personal Allowance by Consumer Price Index (CPI) once it has reached £12,500
As announced at Autumn Statement 2016, the government will legislate to ensure that once the Income Tax Personal Allowance reaches £12,500, it will subsequently be indexed in line with the growth of the CPI, rather than being set equal to the annual salary of an individual working 30 hours per week on the National Minimum Wage as under current legislation in Finance (No.2) Act 2015.
1.5. ISA uprating
As announced at Autumn Statement 2016, the government will uprate the annual subscription limit for Junior ISAs and Child Trust Funds in line with the CPI to £4,128, alongside the ISA subscription limit increase from £15,240 to £20,000, which was previously announced at Budget 2016. This will be effective from 6 April 2017. These new limits will be applied by updates to the ISA and Child Trust Fund Regulations.
1.6. National Insurance thresholds
As announced at Autumn Statement 2016 and as recommended by the Office of Tax Simplification (OTS) in March 2016, the government will align the secondary (employer) threshold with the primary (employee) threshold for the National Insurance contributions (NICs). This means that from April 2017, both employers and employees will start paying NICs on weekly earnings above £157. The changes will be made through regulations as part of the routine NICs re-rating process and will come into force on 6 April 2017.
A TIIN has been published on 5 December 2016.
1.7. Abolition of Class 2 NICs
As confirmed at Autumn Statement 2016 following consultation, the government will legislate to abolish Class 2 NICs from April 2018. This will simplify the National Insurance regime for the self-employed. From the 2018 to 2019 tax year onwards, no new Class 2 liabilities will arise and it will not be possible to make voluntary payments of Class 2 for that tax year and later tax years. The legislation will not make any changes to the ability of people to make Class 2 payments, including voluntary payments, with respect to the 2017 to 2018 tax year and earlier.
As well as abolishing Class 2 NICs the legislation will include provisions to introduce a contributory benefits test into Class 4 NICs and where necessary to allow the self-employed to access contributory benefits through payment of Class 3 NICs from 2018 to 2019 onwards.
1.8. Reform of the tax and NICs treatment of termination payments
As announced at Budget 2016 and confirmed at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to tighten and clarify the tax treatment of termination payments. This includes:
- making all contractual and non-contractual payments in lieu of notice (PILONs) taxable as earnings
- requiring employers to tax the equivalent of an employee’s basic pay if notice is not worked
- removing foreign service relief for employees who have spent time working outside of the UK
Legislation will also be introduced in the NICs Bill 2017 to align the tax and employer NICs treatment of termination payments so that employer NICs will be payable on the elements of the termination payment exceeding £30,000 on which Income Tax is due. The first £30,000 of a termination payment will remain exempt from Income Tax and National Insurance.
A technical consultation on draft legislation was held over the summer. The government has listened to employers and made a number of changes to make the rules easier for employers to operate. These changes include requiring the employer to calculate post-employment notice income on basic pay only.
The measure will take effect from 6 April 2018.
1.9. Simplifying PAYE Settlement Agreements
As announced at Autumn Statement 2016 and following consultation, the government will legislate in Finance Bill 2017 to simplify the process for applying for and agreeing PAYE Settlement Agreements (PSAs). This removes the requirement for employers to obtain up-front agreement from HMRC for items to be included in a PSA. The changes will take effect from 6 April 2018.
1.10. Employer – arranged pensions advice exemption
As announced at Budget 2016, in response to the Financial Advice Market Review, the government will legislate in Finance Bill 2017 for a new Income Tax exemption and NICs disregard to cover the first £500 worth of pension advice provided to an employee in a tax year. It will allow advice on both pensions and, general financial and tax issues relating to pensions. The measure will take effect from 6 April 2017.
Draft legislation (provision 6) and a TIIN has been published on 5 December 2016.
1.11. Restriction of the money purchase annual allowance to £4,000
As announced at Autumn Statement 2016 the government will legislate in Finance Bill 2017 to reduce the money purchase annual allowance which restricts the amount of tax relieved contributions an individual can make in a year into a defined contribution pension if they have flexibly accessed their pension savings. A consultation is open from 23 November 2016 until 15 February 2017.
1.12. Changes to tax treatment of foreign pension regimes
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 and introduce regulations to align the tax treatment of foreign pensions more closely with the UK’s domestic pension tax regime.
Changes will include:
- bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic pensions and lump sums
- closing specialist pension schemes for those employed abroad (section 615 schemes) to new saving
- extending from 5 to 10 tax years the UK’s taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief
- aligning the tax treatment of funds transferred between registered pension schemes
- updating the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes
Draft legislation (provision 11) and a TIIN has been published on 5 December 2016.
1.13. Salary sacrifice limitation
As announced at Autumn Statement 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to remove the Income Tax and employer NICs advantages of salary sacrifice schemes. The taxable value of benefits in kind where cash have been forgone will be fixed at the higher of the current taxable value or the value of the cash forgone. This includes benefits that are currently tax exempt. As outlined in the consultation, the new rules will not affect pensions saving, employer provided pensions advice, childcare, or Cycle to Work. Following consultation, the government has also decided to exempt Ultra-Low Emission cars (ULEVs), with emissions under 75 grams of CO2 per kilometre, to incentivise the take-up of these vehicles.
This change will take effect from 6 April 2017. Those already in salary sacrifice contracts at that date will become subject to the new rules in respect of those contracts at the earlier of:
- an end, change, modification or renewal of the contract
- 6 April 2018, except for cars, accommodation and school fees when the last date is 6 April 2021
1.14. Review of the valuation of benefits in kind
As announced at Autumn Statement 2016, the government will consider how benefits in kind are valued for tax purposes. The government will publish at Budget 2017 a call for evidence on the valuation of benefits in kind, and additionally a consultation on employer-provided living accommodation.
1.15. Company Car Tax - bands and rates for tax year 2020 to 2021
As announced at Autumn Statement 2016, and following consultation, the government will legislate in Finance Bill 2017 for new, lower bands for the lowest emitting cars. For cars with emissions below 50 gCO2/km bands will be based on the electric range of the car. The relevant percentage for cars emitting greater than 90 gCO2/km will rise by 1 percentage point.
The table below shows the new bands and rates for tax year 2020 to 2021.
|CO2 (g/km)||Electric range (miles)||2020 to 2021|
|1 - 50||>130||2|
|1 - 50||70 - 129||5|
|1 - 50||40 - 69||8|
|1 - 50||30 - 39||12|
|1 - 50||<30||14|
|51 - 54||15|
|55 - 59||16|
|60 - 64||17|
|65 - 69||18|
|75 - 79||20|
|80 - 84||21|
|85 - 89||22|
|90 - 94||23|
|95 - 99||24|
|100 - 104||25|
|105 - 109||26|
|110 - 114||27|
|115 - 119||28|
|120 - 124||29|
|125 - 129||30|
|130 - 134||31|
|140 - 144||33|
|145 - 149||34|
|150 - 154||35|
|155 - 159||36|
|160 and above||37|
Electric range (miles) is the number of kilometres declared on the certificate of conformity or type approval certificate and multiplied by 0.62.
1.16. Alignment of dates for making good on benefits in kind
As announced at Autumn Statement 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to align the dates for making good on benefits in kind, where an employee makes a payment in return for the benefit in kind they receive. This has the effect of reducing the taxable value of the benefit in kind, often to zero. Legislation in Finance Bill 2017 will set the date for an employee to make good on benefits in kind which are not accounted for in real time through PAYE (benefits in kind which are not payrolled). Following the consultation, the government concluded that 6 July following the end of the tax year is a an appropriate date, so the taxable value of the benefit in kind will be reduced or removed if making good takes place by that date.
The change will affect making good on a tax liability arising in the tax year 2017 to 2018 and subsequent years.
1.17. Assets made available without transfer of ownership
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to set out a detailed method for calculating the taxable value (cash equivalent) of an asset provided to the employee which is made available for private use. This means that employees will just pay tax for those days on which the asset is available for private use. This will provide clarity for both employees and employers. The changes will take effect from 6 April 2017.
Draft legislation (provision 5) and a TIIN has been published on 5 December 2016.
1.18. Legal Support
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to ensure that all employees (or former employees) called to give evidence, for example, at an inquiry, will be able to receive legal support funded by their employer tax-free. The changes will take effect from 6 April 2017.
Draft legislation (provisions 7 and 8) and a TIIN has been published on 5 December 2016.
1.19. Employee business expenses
As announced at Autumn Statement 2016, the government will publish a call for evidence at Budget 2017 on the use of the Income Tax relief for employees’ business expenses, including those that are not reimbursed by the employer.
1.20. Off-payroll working in the public sector: reform of the intermediaries legislation
As announced at Autumn Statement 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to reform the off-payroll rules (often known as IR35) in the public sector. This was first announced at Budget 2016.
Responsibility for operating the off-payroll working rules, and deducting any tax and NICs due, will move to the public sector body, agency or other third party paying an individual’s personal service company (PSC). The change will come into effect from 6 April 2017 and apply across the UK.
As a result of feedback received during consultation, the 5% tax-free allowance for general business expenses, available to workers currently applying the rules, will be withdrawn for PSCs working in the public sector. This will simplify administration and reflects the fact that PSCs no longer have responsibility for applying the rules. Public sector bodies will be responsible for determining whether or not the rules apply and will be required to share this information with agencies in order for them to operate the rules correctly. To address concerns about acting in good faith on incorrect or false information, transfer of liability provisions will be introduced to provide protection. Public sector bodies in scope are those subject to the provisions of the Freedom of Information Act 2000 and the Freedom of Information (Scotland) Act 2002. The rules remain unchanged for the private sector.
1.21. Tax-advantaged venture capital schemes
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to amend the requirements for the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCT) to:
- clarify the EIS and SEIS rules for share conversion rights - the rights to convert shares from one class to another will be excluded from being an arrangement for the disposal of those shares within the no pre-arranged exits requirements for the EIS and SEIS for shares issued on or after 5 December 2016
- provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures, to align with EIS provisions, for investments made on or after 6 April 2017
- introduce a power to enable regulations to be made in relation to certain share-for-share exchanges to provide greater certainty to VCTs, which will take effect on the date from which Finance Bill 2017 receives Royal Assent
A consultation will be carried out into options to streamline and prioritise the advance assurance service. The government will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time, and will review it over the longer term.
1.22. Clarification of tax treatment for partnerships
As announced at Autumn Statement 2016, and following consultation the government will legislate in Finance Bill 2017 to clarify and improve certain aspects of partnership taxation. This will include legislation to ensure profit allocations to partners are fairly calculated for tax purposes.
Draft legislation will be published in early 2017 for consultation.
1.23. Capital Gains Tax: abolishing Employee Shareholder Status
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to withdraw the Capital Gains Tax exemption and the Income Tax reliefs in respect of shares received as consideration for entering into most Employee Shareholder Status agreements. Agreements entered into before 1 December 2016, or before 2 December 2016 where independent advice was received before 1:30pm on 23 November 2016, will retain their tax benefits. This is part of the government’s policy of promoting sustainability and fairness in the system of tax reliefs. The changes apply to all UK residents.
Draft legislation (provisions 29-31) and a TIIN were published on 23 November 2016.
1.24. Tackling disguised remuneration tax avoidance schemes
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to tackle existing and prevent future use of disguised remuneration avoidance schemes. This will ensure scheme users pay their fair share of Income Tax and NICs. The future use of schemes will be prevented by strengthening the current rules. The existing use of schemes will be tackled by the introduction of a new charge on disguised remuneration loans that were made after 5 April 1999 and remain outstanding on 5 April 2019. A technical consultation to ensure the draft legislation is targeted and effective ran over the summer. Legislation will also be introduced to ensure there is no double taxation.
Draft legislation (provisions 32-35) and a TIIN has been published on 5 December 2016.
As proposed in the technical consultation, the measure will be extended to schemes used by the self-employed. Legislation will be introduced in Finance Bill 2017 to prevent the future use of these schemes with effect from 6 April 2017. The existing use of schemes will also be tackled by the introduction of a new charge on outstanding disguised remuneration loans. This loan charge will operate in a similar way to the employment loan charge outlined in the technical consultation. It will have effect from Royal Assent of Finance Bill 2017.
Draft legislation (provisions 32-35) and a TIIN has been published on 5 December 2016.
Legislation will be also introduced to prevent employers claiming a deduction when computing their taxable profits for contributions to a disguised remuneration scheme unless Income Tax and NICs are paid within a specified period. This will have effect for contributions made on or after 1 April 2017 (for Corporation Tax purposes) or 6 April 2017 (for Income Tax purposes).
Draft legislation (provisions 32-35) and a TIIN has been published on 5 December 2016.
Further detail on all 3 disguised remuneration measures can be found in the technical note and summary of responses.
1.25. Life insurance policies: part surrenders and part assignments
As announced at Autumn Statement 2016, and following consultation, the government will legislate in Finance Bill 2017 to allow individuals who, in certain unusual circumstances, have part surrendered or part assigned their life insurance policies and inadvertently generated a wholly disproportionate tax charge, to apply to HMRC to have the charge recalculated on a just and reasonable basis. This will lead to fairer outcomes for these policyholders. The changes will take effect from 6 April 2017.
1.26. Inheritance Tax: donations to political parties
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to 2018 to extend the existing IHT exemption for donations to political parties to include donations made to qualifying political parties in the devolved legislatures and parties that have acquired representatives through by-elections. These changes will modernise the IHT exemption and reflect changes to the political landscape in which political parties operate.
1.27. Personal portfolio bonds: reviewing the property categories
As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to give the government the power to amend by regulations the list of assets that can be invested in without triggering the personal portfolio bonds anti-avoidance rules. The changes will take effect on Royal Assent.
1.28. Sharing economy: allowance for trading and property income
As announced at Budget 2016, legislation will be introduced in Finance Bill 2017 to create 2 new allowances for individuals of £1,000 each, 1 for trading and 1 for property income. The trading allowance will also apply to certain miscellaneous income from providing assets or services.
Where the allowances cover all of an individual’s trading or property income (before expenses) then they will no longer have to declare or pay tax on this income. Those with higher amounts of income will have the choice to deduct the allowance instead of deducting their actual allowable expenses. These allowances will take effect from 6 April 2017.
Draft legislation (provision 19) and a TIIN has been published on 5 December 2016.
2. Corporation Tax
2.1. Corporate streaming review
As announced at Autumn Statement 2016, the government will modernise the rules on the taxation of dividend distributions to corporate investors. This will preserve the current ability of institutional investors, such as life companies with pensions business, to invest in a tax neutral way in authorised investment funds. Detailed proposals will be published in draft secondary legislation in the New Year.
2.2. Authorised contractual schemes: reducing tax complexity for investors
As announced at Autumn Statement 2016, and following consultation, the government will legislate in Finance Bill 2017 and secondary legislation to reduce tax complexity for investors and clarify requirements on operators of an authorised contractual scheme (ACS). From Royal Assent, the operator of a co-ownership ACS (CoACS) will be able to elect to compute capital allowances and allocate them to investors, and legislation will clarify the treatment of assets acquired and disposed of. Also from Royal Assent, operators of a CoACS will be required to provide specific tax-related information to investors and to HMRC, and legislation will clarify what amounts are to be treated as an investor’s income where an ACS has invested in an offshore fund. The computation of the capital gain on disposal of units in transparent funds including CoACS will be clarified through secondary legislation for disposals on or after an operative date in summer 2017.
2.3. Bespoke tax regime for Insurance Linked Securities (ILS)
As announced at Budget 2015, the government will ensure the reinsurance activity of insurance special purpose vehicles (ISPV) that issue ILS will be exempt from Corporation Tax. ILS offer alternative forms of risk mitigation for insurance and reinsurance firms by transferring insurance risk to capital market investors. In addition, payments to investors will be exempt from withholding tax.
2.4. Museums and galleries tax relief
As announced at Autumn Statement 2016, and following consultation, the government will broaden the scope of the museums and galleries tax relief that was announced at Budget 2016 to include permanent exhibitions. This is following a consultation on the policy design which ended on 28 October. Relief is available on the cost of developing new exhibitions including those that are toured. Autumn Statement 2016 announced the rates for the relief as 25% for touring exhibitions and 20% for non-touring exhibitions. The relief will allow museums and galleries to claim a credit worth up to £100,000 on exhibitions that are toured and £80,000 on non-touring exhibitions. The maximum credit allowable is the equivalent of qualifying expenditure of £500,000. The relief will take effect from 1 April 2017 to April 2022 unless renewed. In 2020 the government will review the tax relief and set out plans beyond 2022.
2.5. Re-scope of the Bank Levy
As announced at the 2015 Summer Budget, the Bank Levy’s tax base will change to UK operations from 1 January 2021. As announced at Autumn Statement 2016 and following consultation, the government will exempt liabilities relating to certain funding for UK banks’ overseas subsidiaries, as well as liabilities relating to the funding of UK banks’ overseas branches from the Bank Levy. The changes will take effect from 2021 and will be legislated in Finance Bill 2017 to 2018.
A consultation response document has been published on 5 December 2016, setting out further details of these reforms.
2.6. Petroleum Revenue Tax regime administrative savings
As announced at Autumn Statement 2016, the government will build on the permanent zero-rating of Petroleum Revenue Tax (PRT) by introducing changes to simplify the PRT regime and reduce the administrative burden of participators who file PRT returns in Finance Bill 2017. The government published legislation on 23 November 2016 to simplify the process for opting out of the PRT regime. This will remove any conditions for opting out so that participators wishing to opt their fields out of PRT only need to make a simple election and notify HMRC. For participators who remain in the regime, HMRC will simplify the returns process by removing some reporting requirements which are no longer relevant. Industry has already been consulted on these changes. This will save industry £6.2m in total over 10 years in reduced administration costs. These administrative changes took effect from 23 November 2016.
Draft legislation (provision 46) and a TIIN was published on 23 November 2016.
2.7. Tax deductibility of corporate interest expense
As announced at Budget 2016 and following consultation, the government will introduce rules in Finance Bill 2017 that limit the tax deductions that companies can claim for their interest expenses, with effect from 1 April 2017. This takes forward one element of the Business Tax Road Map and implements one of the actions of the G20/ Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting project. The UK government consulted extensively on the proposals in October 2015 and again on the detailed design and implementation in May 2016.
The legislation will adopt the OECD’s best practice recommendations for interest deductibility. The new rules will restrict each group’s net deductions for interest to 30% of earnings before interest, tax, depreciation and amortisation (EBITDA) taxable in the UK or, if higher, to an amount based on the net-interest to EBITDA ratio for the worldwide group. The legislation will also provide for repeal of the existing debt cap legislation and its replacement by a modified debt cap which will ensure that the net UK interest deduction does not exceed the total net interest expense of the worldwide group. Amongst other features, the rules will include provisions to protect investment in infrastructure that has a public benefit and a de minimis rule so that only large businesses are affected. There will be no special provisions for banking and insurance groups. The draft bill published today includes all the core provisions of the restriction, including:
- the Fixed Ratio Rule and the Modified Debt Cap, setting out how the rules will operate for the majority of groups
- the rules for performing the calculation using the Group Ratio Rule, although not yet all of the key definitions, and allocating any restriction to individual companies and accounting periods
- provisions to carry forward restricted interest and surplus capacity, which deal with companies leaving and joining groups - commencement, transitional and anti-avoidance rules are also included
It is expected that the remaining provisions will be published by the end of January in an updated version of the draft legislation. These will include:
- the definitions needed for the Group Ratio Rule, including how it will apply to joint ventures, rules concerning related parties and the Public Benefit Infrastructure Exemption
- rules for particular industries and issues such as the Patent Box and other tax incentives, leasing, Real Estate Investment Trusts, and securitisations
A TIIN and summary of responses to the consultation has also been published on 5 December 2016. The summary of responses sets out the government’s decisions on all aspects of the rules and includes a full list of which aspects are covered by the draft legislation (provision 21) published on 5 December, and which are to be published in a revised draft by the end of January 2017.
2.8. Corporation Tax: reform of loss relief
As confirmed at Autumn Statement 2016, and following consultation over the summer, the government will legislate in Finance Bill 2017 to reform the rules governing corporate losses carried forward from earlier periods.
The reform will:
- give all companies more flexibility by relaxing the way in which they can use losses arising on or after 1 April 2017 when they are carried forward - these losses will be useable against profits from different types of income and other group companies
- restrict companies’ use of losses carried forward so that they can’t reduce their profits arising on or after 1 April 2017 by more than 50% - this restriction will apply to a company or group’s profits above £5 million, carried forward losses arising at any time will be subject to the restriction
The changes will take effect from 1 April 2017. The government response to the consultation and draft legislation for the loss restriction calculation and post-April 2017 loss relaxation and group relief for carried-forward losses have been published on 5 December 2016. The government intends to publish the remaining draft legislation for consultation by the end of January 2017.
2.9. Non-resident companies chargeable to Income Tax
As announced at Autumn Statement 2016, a consultation will run shortly after Budget 2017 to consider the case and options for bringing non-UK resident companies, who are currently chargeable to Income Tax on their UK taxable income, within the scope of Corporation Tax. These companies would then be subject to the rules which apply generally for the purposes of Corporation Tax, including the limitation to corporate interest expense deductibility and loss relief rules.
2.10. Northern Ireland Corporation Tax change
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to make minor changes to the Northern Ireland Corporation Tax regime. These will give all small and medium sized enterprises (SMEs) trading in Northern Ireland potential to benefit from the regime. Other amendments will minimise the risks of abuse and ensure the regime is ready for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing. The changes give an option to SMEs which do not meet the Northern Ireland employment test, but do have a trading presence there, to access the Northern Ireland rate on the same terms as large companies.
The changes will come into force on Royal Assent and have effect for accounting periods beginning on or after the first day of the financial year appointed by HM Treasury in commencement regulations for the Northern Ireland Corporation Tax regime.
Draft legislation (provisions 25 and 26) and a TIIN has been published on 5 December 2016.
2.11. Enlarging Social Investment Tax Relief
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to amend the Social Investment Tax Relief (SITR) scheme to:
- increase the amount of investment a social enterprise may receive over its lifetime to £1.5 million, for social enterprises that receive their initial risk finance investment no later than 7 years after their first commercial sale - the current limit of €344,000 over a rolling 3 year period will continue to apply to older social enterprises
- reduce the limit on full-time equivalent employees to below 250 employees
- exclude certain activities, including asset leasing and on-lending, to ensure the scheme is well targeted - investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in future
- exclude the use of money raised under the SITR to pay off existing loans
- clarify that individuals will be eligible to claim relief under the SITR only if they are independent from the social enterprise
- introduce a provision to exclude investments where arrangements are put in place with the main purpose of delivering a benefit to an individual or party connected to the social enterprise
The changes will take effect for investments made on or after 6 April 2017. The government intends to publish the draft legislation and a TIIN by the end of January 2017.
2.12. Grassroots sports: deductions for Corporation Tax
As announced at Autumn Statement 2016, and following consultation in spring 2016, the government will legislate in Finance Bill 2017 to provide a Corporation Tax deduction for contributions to grassroots sports. This will encourage participation in grassroots sports and reduce administrative burdens for some organisations which currently make contributions to grassroots sports. The new rules allow companies to deduct all contributions to grassroots sports through recognised sport governing bodies, and deductions of up to £2,500 in total annually for direct contributions.
Sport governing bodies will be able to deduct all their contributions to grassroots sports. The government’s response to the consultation have been published on 5 December. The legislation will apply to qualifying expenditure incurred on or after 1 April 2017.
2.13. Patent Box: cost sharing for collaborative Research and Development (R&D)
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to add specific provisions to the revised Patent Box rules introduced in Finance Act 2016, covering the case where R&D is undertaken collaboratively by 2 or more companies under a ‘cost sharing arrangement’ (CSA). The provisions will ensure that companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way.
The new rules, which apply UK wide, provide that:
- where a company acquires an interest in or increases its interest in a CSA, an appropriate amount of the consideration paid counts as acquisition cost for the purpose of calculating the R&D fraction, to the extent any Intellectual Property (IP) assets are held within the CSA
- where a company disposes of an interest or reduces its interest in a CSA, an appropriate amount of any consideration received is treated as IP income, to the extent any IP assets are held within the CSA
- activity of participants in the CSA to develop IP or products is appropriately treated in the company’s R&D fraction
This has effect for accounting periods commencing on or after 1 April 2017.
Draft legislation (provision 24) and a TIIN has been published on 5 December.
2.14. Hybrids and other mismatches
As announced at Autumn Statement 2016 the government will legislate in Finance Bill 2017 to make minor changes to the new hybrid mismatch regime legislation introduced in Finance Act 2016, in order to improve its operation. Following consultation with stakeholders, further technical modifications will be made to 2 areas of the legislation. These concern the treatment of mismatches which arise from certain timing differences, and the way in which deductions for amortisation affect the mismatch rules. These modifications will take effect along with the new regime on 1 January 2017.
A technical note setting out the detail of the changes required has been published on 5 December 2016.
2.15. First-year allowances for charge-point infrastructure
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to incentivise investment in Ultra Low Emissions Vehicles (ULEVs). The 100% first-year allowance (FYA) will allow businesses to deduct investments in electric charge-point equipment from their pre-tax profits in the year of purchase. The relief is designed to encourage the use of electric vehicles by increasing charge-point availability. This took effect from 23 November 2016 to avoid delays to planned investments.
Draft legislation (provision 36) and a TIIN was published on 23 November 2016.
2.16. Offshore funds: calculation of reportable income
As announced at Autumn Statement 2016, secondary legislation will be introduced to disallow the deduction of performance fees incurred by offshore reporting funds in calculating UK investors’ reportable income. Such expenses will instead, where incurred, reduce investors’ taxable gains when they dispose of their holdings in an offshore reporting fund. This change will take effect for reporting periods commencing on or after 1 April 2017.
Draft legislation and a TIIN has been published on 5 December 2016.
2.17. Substantial Shareholding Exemption (SSE) reform
As announced at Autumn Statement 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to simplify the rules. It will remove the investing requirement within the SSE and will also provide for the SSE to apply to companies owned by qualifying institutional investors, without regard to the nature of the activities carried on by the companies they are invested in. Both changes will apply from 1 April 2017. These changes will ensure that the UK remains a competitive environment for global investors, whilst reducing some complexity in the Corporation Tax system for UK groups.
3.1. Non-domicile taxation: changes to the rules for Business Investment Relief (BIR)
As announced at Autumn Statement 2015, and following consultation, the government will legislate in Finance Bill 2017 to widen the rules governing the BIR scheme to encourage investment in UK companies. The changes will take effect from 6 April 2017.
3.2. Non-domicile taxation: Inheritance Tax on UK residential property
As announced at Summer Budget 2015, and following consultation, the government will legislate in Finance Bill 2017 to extend Inheritance Tax (IHT) to UK residential properties which are held by non-domiciled individuals through overseas vehicles. This will bring the treatment of such properties for IHT purposes into line with the existing treatment where they are held by individuals who are domiciled in the UK. The changes will take effect from 6 April 2017.
Draft legislation (provision 42) and a TIIN has been published on 5 December 2016.
3.3. Non-domicile taxation: deeming provisions for Income Tax, Capital Gains and IHT
As announced at Summer Budget 2015, and following consultation, the government will legislate in Finance Bill 2017 so that those individuals who are not domiciled in the UK will be deemed to be UK domiciled for tax purposes if they are either (a) resident in the UK for 15 of the past 20 tax years, or (b) if they are born in the UK with a UK domicile of origin. These changes will bring an end to permanent non-dom status for tax purposes.
This follows a consultation which set out the detail of the proposals to deem certain non-doms to be UK-domiciled for tax purposes. The changes will take effect from 6 April 2017. More detail on these changes, including transitional protections, is set out in the consultation response document.
4. Indirect taxes
4.1. VAT Grouping: consultation
As announced at Autumn Statement 2016 a consultation will run from 5 December 2016 to 27 February 2017. The purpose of the consultation is to inform UK policy following the 2 significant decisions of the Court of Justice of the European Union (CJEU) in Larentia & Minerva and Marenave (C-108/14) and C-109/14) and Skandia America Corporation (C-7/13). The cases were about eligibility for VAT grouping and the treatment of cross-border transactions. The consultation will invite UK business views on whether and, if so, what UK legal changes are required following these cases and the international response.
4.2. Implementation of the Fulfilment House Due Diligence Scheme (FHDDS)
As announced at Budget 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to provide for a new due diligence registration scheme for all UK based fulfilment house businesses. Further draft legislation setting out the record-keeping and due diligence standards will be published for consultation in early 2017. The new scheme will open for registration from April 2018.
4.3. Tackling exploitation of the VAT relief on adapted cars for wheelchair users
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to tackle abuse of VAT relief on adapted cars for wheelchair users, while ensuring those that should be able to benefit from the relief can continue to do so. A review of this VAT relief found that some people are targeting and abusing it. They obtain a VAT zero-rate relief on vehicles with minor adaptions and later reverse the changes to sell the vehicle on for profit.
A consultation in 2014 set out options to amend the scheme. Respondents were supportive of the need to make changes in order to tackle the abuse. The legislation will limit the number of vehicles that can benefit from the relief in a given period, make submission of declarations of eligibility to HMRC mandatory and apply a penalty to those found abusing the scheme. The changes will take effect from 1 April 2017.
Draft legislation (provision 43) and a TIIN has been published on 5 December 2016.
4.4. VAT Flat Rate Scheme (FRS) changes
As announced at Autumn Statement 2016, the government will introduce a new 16.5% flat rate, with effect from 1 April 2017, for all FRS businesses with limited costs, such as many labour-only businesses. This measure creates a more level playing field for all small businesses, while keeping VAT accounting simple for the small businesses who use the scheme as intended. Businesses using the scheme, and new businesses joining the scheme, will need to complete a simple test, using information they already hold, to work out whether they must use the new 16.5% rate. To support businesses, the government will introduce an easy to use online tool that will help them determine whether the new rate applies to them. This rate will be introduced through secondary legislation. Anti-forestalling legislation was introduced on 23 November 2016 in a revision to Public Notice 733 to support the measure.
4.5. Insurance Premium Tax (IPT): standard rate increased
As announced at Autumn Statement 2016, the government will legislate in the Finance Bill 2017 to increase the standard rate of IPT from 10% to 12%. The changes will take effect from 1 June 2017 for premiums received on or after that date relating to risks for which the period of cover under the terms of an insurance contract begins on or after that date.
From 1 June 2018, the new rate will apply to all premiums, regardless of when the commencement of cover begins under the contract. The anti-forestalling provisions will be reviewed and any changes will be announced at Budget 2017.
Draft legislation (provisions 44 and 45) and a TIIN has been published on 5 December 2016.
4.6. Tobacco: Minimum Excise Tax (MET)
As announced at Budget 2016, the government will legislate in Finance Bill 2017 to introduce a MET for cigarettes. A MET will set a minimum level of duty for any packet of cigarettes, which will support public health objectives, tackle the very cheapest tobacco and promote fiscal sustainability. The rate of the MET will be announced at Budget 2017. This change applies to cigarettes sold in the UK.
Draft legislation (provision 50) and a TIIN has been published on 5 December 2016.
4.7. Remote Gaming Duty: freeplays reform
As announced at Budget 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to charge Remote Gaming Duty on remote gaming freeplays to bring them more into line with the treatment of free bets in General Betting Duty. This will incorporate changes to the draft legislation exposed at consultation to address industry concerns about the impact of the original proposal. The changes will take effect for accounting periods beginning on or after 1 August 2017 and apply to any remote gaming participation by a UK person.
4.8. Landfill Tax: definition of taxable disposal
As announced at Budget 2016, and following consultation over the summer, the government will legislate in Finance Bill 2017 to put the definition of a taxable disposal for Landfill Tax purposes beyond doubt. This will redefine a taxable disposal for Landfill Tax purposes so that any material disposed of at a landfill site will be taxable unless expressly exempt. New exemptions will be introduced to avoid inadvertently extending the scope of the tax. Legislation will be introduced in Finance Bill 2017 and in secondary legislation. The government’s intention is to bring the provisions into force as soon as is practicable, and the changes will apply to disposals to landfill in England, Wales and Northern Ireland.
4.9. Air Passenger Duty: Regional Airport Review
As announced at Autumn Statement 2016, the government has published a summary of responses to the consultation on how to support regional airports in England from the potential effects of Air Passenger Duty (APD) devolution. Given the strong interaction with EU law, the government does not intend to take specific measures now, but intends to review this area again after the UK has exited from the EU.
4.10. Soft Drinks Industry Levy
As announced at Budget 2016, and following consultation on the design and implementation of the levy over the summer, the government will legislate in Finance Bill 2017 for the Soft Drinks Industry Levy. This is a levy on importers and producers of beverages that contain added sugar to help tackle childhood obesity. The 2 thresholds, at 5g and 8g of sugar per 100ml have been designed so that, by taking reasonable steps to reduce sugar content, UK producers and importers of soft drinks can pay less or escape the charge altogether. The levy will take effect from April 2018.
There will be an exemption for the smallest operators and a credit against levy liability, subject to evidence, for liable drinks that are exported.
5. Annual Tax on Enveloped Dwellings
5.1. Annual Tax on Enveloped Dwellings (ATED): 2017 to 2018 chargeable amounts
As announced at Autumn Statement 2016, the ATED annual charges will rise in line with the September 2016 CPI. The new charges will apply for the chargeable period 1 April 2017 to 31 March 2018.
A TIIN has been published on 5 December 2016.
The table below shows the 2016 to 2017 charges within each property band and what the revised 2017 to 2018 charges will be:
|Taxable value of the property||Current annual chargeable amounts for the 2016 to 2017 period||Annual chargeable amounts for the 2017 to 2018 period|
|£500,001 to £1,000,000||£3,500||£3,500 (no change)|
|£1,000,001 to £2,000,000||£7,000||£7,050|
|£2,000,001 to £5,000,000||£23,350||£23,550|
|£5,000,001 to £10,000,000||£54,450||£54,950|
|£10,000,001 to £20,000,000||£109,050||£110,100|
|£20,000,001 and over||£218,200||£220,350|
6. Administration and enforcement
6.1. Making Tax Digital (MTD)
The government published a package of 6 consultations on MTD in the summer, which closed on 7 November 2016. In addition to inviting written responses to each consultation document, HMRC undertook significant stakeholder engagement activity to gather views from businesses, agents and software providers on the proposals. This included 15 face-to-face roundtable events across the UK and 14 webinars (with over 3,000 participants). The government is pleased with the large number of responses HMRC has received to the consultations. There were over 1,200 responses to the online survey in the short guide to the 6 consultations.
HMRC received via email and letter over 600 responses to the consultations ‘Bringing Business Tax Into The Digital Age’ and ‘Voluntary Pay-As-You-Go’, over 120 responses to the ‘Tax Administration’ consultation, over 200 responses to the consultations on simplification measures and nearly 80 responses to the consultation on making better use of information. To ensure that the views of respondents to the consultations are fully considered, the government will publish its response to all 6 consultations, together with draft Finance Bill 2017 legislation in January 2017.
6.2. Avoidance: sanctions and deterrents
As announced at Autumn Statement 2016, and following consultation, the government will legislate in Finance Bill 2017 for a new penalty on those individuals or entities who enable the use of tax avoidance arrangements which HMRC later defeats (‘enablers’). The legislation will also provide clarification as to what constitutes ‘reasonable care’ in relation to the application of the penalties charged on taxpayers following the defeat of tax avoidance.
6.3. Hidden economy: conditionality
At Budget 2016 the government announced a consultation on the principle of conditionality (making access to licences or services conditional on tax registration). After considering responses to that public consultation, the government believes that conditionality could be an effective way to reduce the size of the hidden economy and mitigate the negative impact it has on the majority of businesses who pay their fair share. The government also recognises that conditionality must be developed in a way which does not impose undue burdens upon compliant businesses, and will coordinate any changes with the longer-term programme for wider tax administration reforms and MTD. The government will consider the case for introducing conditionality and will set out its next steps and publish a response document at Budget 2017.
6.4. Hidden economy: tougher sanctions for repeat offenders
At Budget 2016 the government announced a consultation on increased sanctions for those that operate in the hidden economy. The consultation covered 2 outline proposals – stronger sanctions for those who repeatedly fail to notify HMRC of a tax liability, and increased monitoring of those found to be engaging in hidden economy activity.
After considering responses to that public consultation, the government believes that there is a good case for strengthening those sanctions. It will coordinate any changes with the longer-term programme for wider tax administration reforms. The government will set out its next steps and publish a response document at Budget 2017.
6.5. Hidden economy: data from Money Service Businesses
As announced at Budget 2016, and following consultation, the government will legislate in Finance Bill 2017 to extend HMRC’s data-gathering powers to Money Service Businesses (MSBs) which provide money transfer, cheque cashing and currency exchange services. This will allow HMRC to more effectively identify businesses and individuals who disguise income by exploiting services offered by MSBs, particularly through cash-based transactions.
6.6. Partial enquiry closure notices
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to allow discrete matters in large, complex or high risk cases to be concluded ahead of the final closure of a tax enquiry. This will give HMRC and its customers certainty about tax owed on individual matters without having to wait for all matters in a tax enquiry to be resolved. In response to consultation the power will be available to both HMRC and its customers and will apply to current and future enquiries. HMRC will use the new partial closure power where there is tax avoidance, high complexity, or large amounts of tax at risk. Where HMRC issues a partial closure notice and amends a person’s tax return, as a safeguard, customers will have a right to appeal and ask for payment of the tax to be postponed.
The legislation will come into effect from Royal Assent of Finance Bill 2017 and will apply to enquiries open at that time, and future enquiries.
Draft legislation (provision 90) and a TIIN has been published on 5 December 2016.
6.7. Removing NICs from the effects of the Limitation Act and aligning the assessment and recovery of NICs with that of Income Tax and other taxes
As announced at Autumn Statement 2016, the government will remove NICs from the effects of the Limitations Act 1980 and Northern Ireland equivalent. This will align the time limits and recovery process for enforcing National Insurance debts with other taxes. It will take effect from April 2018. The government will consult on the detail in early 2017.
6.8. Requirement to correct
As announced at Autumn Statement 2016 and following consultation the government will legislate in Finance Bill 2017 to introduce a new requirement for those who have failed to declare UK tax on offshore interests to correct that situation, with new tougher sanctions for those who fail to do so. This new ‘requirement to correct’ is expected to come into force when the Finance Bill 2017 receives Royal Assent and will apply to all taxpayers with offshore interests who have not complied with their UK tax obligations.
6.9. Requirement to notify HMRC of offshore structures
As announced at Autumn Statement 2016, the government will consult on a requirement for businesses that create or promote complex offshore financial structures to notify HMRC of their creation and related client lists. The requirement will be targeted at structures which represent a higher risk of being used for evading UK taxes. This will give HMRC an improved insight into how these structures are being used, and who is using them, allowing compliance activities to be appropriately targeted.
6.10. VAT penalties: changes to penalties for facilitating fraud
As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to introduce a new more effective penalty for tackling aggressive VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. This is known as the ‘knowledge principle’. This change will align the levying of the penalty with the tax decision. This will reduce costs for businesses, HMRC and the courts. This will have effect following Royal Assent to Finance Bill 2017.
6.11. VAT Disclosure of Schemes Regime (VADR): consulting on reform
As announced at Autumn Statement 2016, and following consultation, the government will legislate in in Finance Bill 2017 to strengthen the regime for disclosure of indirect tax avoidance. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the regime will be extended to include all indirect taxes. Details of the tests to apply to arrangements to determine if they should be disclosed to HMRC will be contained in regulations.
6.12. VAT: Retail Export Scheme (RES) digitisation
As announced at Autumn Statement 2016, the government will take forward plans to digitise the VAT Retail Export Scheme (VAT RES). VAT RES (also known as Tax Free Shopping) allows non-EU visitors to recover VAT on goods they buy in the UK and take home in their personal luggage. This is currently a paper-based system. A digital system will improve the efficiency of VAT RES both for retailers and travellers and will reduce the risk of fraud.
Market engagement events during 2015 and 2016 confirmed that the market is interested in working with HMRC to develop a digital solution. HMRC will be taking forward a multi-provider solution to tap into the innovation and creativity that the market can offer.
Digital software will enable retailers and refund providers to send claim information directly to HMRC. The claim will either be digitally stamped or high risk claims selected for further investigation by UK Border Force. This will reduce the administrative burden for travellers, retailers and UK Border Force.
Implementation will be phased to allow retailers and refund providers the time to prepare for a new digital system. During 2017 HMRC will publish its requirements to software developers and release the interface to enable external software to send information to HMRC. The government expects the new system to be adopted by users between 2018 and 2020.
6.13. Customs: use of force to enter vehicles or vessels by customs officers
As announced at Budget 2016 the government will legislate in Finance Bill 2017 to clarify the powers that allow customs officers to use force to gain access to a locked vehicle, when stopping and searching it, which they suspect contains goods liable to forfeiture. This will amend section 163 of the Customs and Excise Management Act 1979. The changes will take effect upon Royal Assent.
Draft legislation (provision 97) and a TIIN has been published on 5 December 2016.
6.14. Customs: examination powers
The government will legislate in Finance Bill 2017 to extend the powers officers currently have under section 24 of the Finance Act 1994 so they can examine goods away from ports, airports and other approved places, under customs control, inland after clearance. This will enable an officer to move, open or unpack goods or containers, or require them to be opened or unpacked, and search the containers and anything in them, as well as mark them as necessary. The changes will take effect upon Royal Assent.
Draft legislation (provision 96) and a TIIN has been published on 5 December 2016.
6.15. Tobacco: Illicit Trade Protocol - licensing of equipment and the supply chain
As announced at Autumn Statement 2015, HMRC launched a formal consultation on the implementation of Article 6 of the Framework Convention on Tobacco Control Illicit Trade Protocol. A formal consultation concerning Article 6 ran from 20 February 2016 to 25 May 2016. Legislation will be introduced in Finance Bill 2017 to control the use and ownership of tobacco manufacturing machinery in the UK to help prevent the illicit manufacture of tobacco products. Legislation will introduce a forfeiture power and penalty in respect of the possession of unlicensed tobacco machinery used for the manufacture of tobacco products.
6.16. Gift Aid and intermediaries
As announced at Budget 2016 the government will introduce regulations later this year to simplify the process of giving through digital channels. The changes will come into force from 6 April 2017. The TIIN has been published on 5 December 2016.
6.17. Tax simplification: response to OTS reviews
The government welcomes the OTS’s reviews on a range of issues, including the alignment of Income Tax and NICs, the design of a look-through taxation system, the Sole Enterprise with Protected Assets model, and an interim paper on the Corporation Tax computation. The government has responded to the reviews at Autumn Statement 2016 and will take the OTS’s findings into account as it continues to work to simplify the tax system. The government has now asked the OTS to carry out 2 further reviews on aspects of the VAT system and on Stamp Duty on share transactions.
Effect of tax policy changes on devolved administrations
Various Acts of Parliament have devolved a range of tax powers to the devolved legislatures. Tax announcements by the UK government do not therefore always extend to the whole of the UK.
At Autumn Statement 2016 the majority of announcements apply equally to the whole of the UK. However the following announcements apply differently in different parts of the UK:
|Tax policy measure||Paragraph reference||Application|
|Income Tax Personal Allowance and the higher rate threshold||1.1||This announcement applies to England, Wales, and Northern Ireland. In Scotland it applies to the savings and dividend income of Scottish taxpayers. However, from April 2017 the Income Tax rates and thresholds applicable to the non-savings and non-dividend income of Scottish taxpayers will be set by the Scottish Parliament. The Personal Allowance is not devolved.|
|Northern Ireland Corporation Tax changes||2.10||This measure only applies to the Corporation Tax rate setting power of the Northern Ireland Assembly. However, whether and when the power is commenced has still to be decided by the government and Northern Ireland Executive.|
|Landfill tax: Definition of taxable disposal||4.8||This announcement applies in England, Wales and Northern Ireland from 1 September 2017. It doesn’t apply in Scotland as Landfill Tax was replaced by Land and Buildings Transaction Tax in Scotland from April 2015|
|Air Passenger Duty||4.9||The Scottish Parliament’s powers in relation to Air Passenger Duty (Scotland Act 2016) don’t commence until 2018. Additionally the announcement proposes no change to existing rules, however, the scope of the review extends to England only.|