Finance Bill 2016

09 December 2015

The Government has published new draft tax legislation to implement policies published at Summer Budget and Autumn Statement 2015.

Consultation on the draft legislation will run until Wednesday 3 February 2016, with the final details being confirmed in Budget 2016 and finally introduced in Finance Bill 2016.

To follow is a list of the relevant legislation within Finance Bill 2016 with a brief explanation of what the regulation applies to. The CIPP Policy Team will publish further details where appropriate over the next couple of weeks.

 

INCOME TAX

Employee share schemes: simplification of the rules

This legislation will give effect to a number of changes to the rules for employment related securities (ERS) and ERS options. These simplify and clarify the law as well as making some minor technical corrections.

Deductions at a fixed rate

This legislation clarifies how the simplified expenses regime should be applied by partnerships in respect of the business use of a home and where premises are used both for business and as a home.

Employment intermediaries and relief for travel and subsistence

This legislation will prevent workers, engaged through an employment intermediary, and their employers, from benefiting from relief for home to work travel expenses

Exemption for trivial benefits in kind

This legislation will exempt from Income Tax and NICs low-value BiKs which meet certain qualifying conditions including a £50 limit per individual BiK. Qualifying ‘trivial’ BiKs provided to directors, office holders of close companies, or to their families or households, will be subject to an annual cap of £300

Gift Aid requirements on intermediaries

This legislation will allow HM Revenue and Customs to impose penalties on intermediaries if they fail to comply with requirements set out in secondary legislation.

Extending Individual Savings Account tax advantages after the death of an account holder

This legislation will allow the ISA savings of deceased individuals to continue to benefit from income tax and capital gains tax advantages, where these savings are retained in an ISA

Simple assessment

This legislation provides a new power to allow HM Revenue and Customs to make an assessment of a person’s Income Tax or Capital Gains Tax liability without the person first being required to complete a Self Assessment tax return.

Time limits for self assessment

This legislation clarifies the time allowed for making a self assessment. This is 4 years from the end of the tax year to which the self assessment relates.

Treatment of income from sporting testimonials

This legislation confirms that all income from sporting testimonials and benefit matches for an employed sportsperson will be chargeable to tax, and liable to employee and employer National Insurance contributions. This treatment will normally be subject to an exemption of £50,000 of the income received.

Retention of the 3 percentage point supplement for diesel cars

This legislation will retain the supplement for diesel company cars which was due to be abolished with effect from 6 April 2016.

 

INHERITANCE TAX

Reforms to the taxation of non-domiciles

This legislation will broadly align the existing Inheritance Tax deemed domicile provisions for individuals with the proposed changes for Income Tax and Capital Gains Tax.

Treatment of pension scheme drawdown funds on death

This legislation extends the scope of the current Inheritance Tax (IHT) exemption so that the failure to draw down all of the designated funds before a pension scheme member’s death will not trigger an IHT charge.

 

TAX ADMINISTRATION

Alignment of HMRC set off provision

This legislation will ensure consistency across the UK in respect of the legal basis on which set-off is applied whilst maintaining the existing procedures for the application of set-off. Currently in Scotland any set-off process of sums owed to and by HMRC is effected under Scottish common law

Extension of HMRC debtor and creditor interest rate to Scotland, Northern Ireland and National Insurance Contributions

This legislation now includes Scotland and Northern Ireland to ensure the consistent application of interest rates payable on all tax related debts to which HMRC is a party. It also sets the rates of interest to an appropriate level given prevailing interest rates, and extends the definition of “taxation matter” to include National Insurance contributions.

Office of Tax Simplification: permanent establishment

Finance Bill 2016 will build on the excellent progress made under the previous Parliament by establishing the Office of Tax Simplification (OTS) on a statutory basis and outlining its core functions.

 

TAX AVOIDANCE, EVASION AND COMPLIANCE

Increased civil sanctions for offshore tax evaders

This legislation strengthens existing civil sanctions and introduces a new asset-based penalty for those who evade their UK tax responsibilities using offshore transfers and structures.

Penalties for the General Anti-Abuse Rule

This legislation will introduce a penalty of 60% of the tax due which will be charged in all cases successfully tackled by the GAAR.

Tackling the hidden economy: extension of new data-gathering powers

This legislation gives HMRC the powers it needs to tackle the digital hidden economy. They provide a new power to gather data from business intermediaries who facilitate transactions, particularly online, and electronic payment providers who operate digital wallets.

Civil sanctions for enablers of offshore tax evasion

This legislation provides new civil penalties and naming provisions for those who have deliberately assisted taxpayers to hide assets and taxable income and gains outside of the UK, to evade their UK tax responsibilities.

Criminal offence for offshore tax evaders

This legislation provides a new criminal offence for those who have income or gains outside of the UK and evade their UK income tax or capital gains tax responsibilities. The criminal offence does not require the prosecutor to prove intent.

New threshold condition for promoters of tax avoidance schemes

This legislation will enable HM Revenue and Customs to consider issuing conduct notices to a broader range of promoters under the Promoters of Tax Avoidance Scheme regime.

Serial avoiders special regime

This legislation will require HM Revenue and Customs (HMRC) to issue a notice to the user of a tax avoidance scheme which HMRC has defeated. The notice will cover a 5 year period, placing an annual reporting requirement on the taxpayer.

Large businesses transparency strategy

This legislation will introduce a requirement for all large businesses to publish an annual tax strategy, in so far as it relate to UK activities, approved by the business’s executive board.

Large business special measures regime

This legislation will result in a business in this position being advised that it may be of risk of being put into special measures. A twelve month improvement period will then allow HMRC and the business to work together to resolve issues. This applies to just a very small number of large businesses who persistently engage in aggressive tax planning and/or who refuse to engage with HMRC.

 

TAX ON SAVINGS AND INVESTMENTS

Dependants' scheme pensions

This legislation removes the need for calculations to be carried out each year comparing the value of the dependants’ scheme pension to the scheme pension of the member in certain circumstances

Personal savings allowance

Finance Bill 2016 will implement a personal savings allowance that will mean as of 6 April, 95% of taxpayers will pay no tax on the first £1,000 of savings income if they are a basic rate taxpayer, and the first £500 if they are a higher rate taxpayer.

Changes to dividend taxation

This legislation will modernise, reform and simplify dividend taxation. Only those with dividend income over £5000 per year, or those who are able to pay themselves dividends in place of wages, will pay more tax.

Reduction of pensions lifetime allowance

This legislation will reduce the standard lifetime allowance from £1.25 million to £1 million for the tax year 2016 to 2017 onwards and increase the standard lifetime allowance each year by the increase in the consumer prices index from tax year 2018 to 2019 onwards