Second Finance Bill 2017 published
12 September 2017
The second Finance Bill of 2017 has been introduced to parliament which includes provisions that were removed from the pre-general election bill published on 8 June 2017.
Clauses that were removed prior to the general election include:
Taxable benefits: time limit for making good
This clause introduces a date for ‘making good’ on benefits-in-kind which are not accounted for in real time through Pay As You Earn (PAYE). The date is 6 July following the end of the tax year in which the tax liability of the benefit-in-kind arises. The date has effect for benefits-in-kind which give rise to a tax liability for the tax year 2017-18 or any subsequent tax year.
Taxable benefits: ultra-low emission vehicles
This clause amends the appropriate percentage for ultra-low emission vehicles (cars with CO2 emissions of 0-75 grams per kilometre) for the purpose of calculating the taxable benefit of a company car. It also makes related changes to the appropriate percentage for conventionally fueled cars. The changes have effect for the tax year 2020-21 and subsequent tax years.
Pensions advice
This clause introduces a new income tax exemption to cover the first £500 worth of pensions advice provided to an employee (including former and prospective employees) in a tax year. It will allow advice not only on pensions, but also on the general financial and tax issues relating to pensions, allowing individuals to make more informed decisions about saving for their retirement. The changes replace existing provisions which limited the exemption solely to pensions advice and was capped at £150 per employee per year. The amendment takes effect for the tax year 2017-18 and subsequent tax years.
Legal expenses etc
This clause extends existing reliefs for employees (or former employees) who may require legal advice or indemnity insurance which is funded by their employer. Currently, such costs are only deductible from earnings for employees who have had allegations made against them in their capacity as an employee (a liability). This clause provides equivalent deductions to be available in relation to proceedings where no allegation has been made or is expected to be made against the employee, for example, where an employee is asked to give evidence before a public hearing when they might also require legal advice and support. It also extends the reliefs for individuals on termination of employment (or for individuals now deceased) so that a deduction is allowable if the relevant costs are met by the employer on behalf of the individual. The amendment takes effect for the tax year 2017-18 and subsequent tax years.
Termination payments etc: amounts chargeable on employment income
This clause introduces amendments to tighten and clarify the income tax treatment of termination payments. The measure has effect for the tax year 2018-19 and subsequent tax years.
PAYE settlement agreements
This clause amends the provisions of Chapter 5 of Part 11, Income Tax (Earnings and Pensions Act) 2003 (ITEPA). It removes the need for PAYE settlement agreements (PSAs) to be agreed with an officer of HM Revenue & Customs (HMRC). The clause arranges for the amendment to have effect from the tax year 2018/19 and subsequent tax years.
Money purchase annual allowance
This clause reduces the money purchase annual allowance (MPAA) from £10,000 to £4,000 with effect from 6 April 2017. Individuals who flexibly access or have already flexibly accessed registered pension scheme savings will be subject to a £4,000 MPAA.
Measures also include:
- New penalties for those who enable the use of tax avoidance schemes that are later defeated by HMRC
- An update on the rules around company interest expenses, to ensure big businesses cannot use excessive interest payments to reduce the amount of tax they pay
- Changes to prevent individuals from using artificial schemes to avoid paying the tax they owe on their earnings
- Abolishing permanent non-dom status, so that those who have lived here for years – and in some cases for their entire lives – pay tax in the same way as UK residents
- Reducing the dividend allowance from £5,000 to £2,000 from April 2018, limiting the difference in tax treatment between those who work through their own company, and those who work as employees or self-employed, whilst ensuring that support for investors is more effectively targeted.
Full details can be found in the second Finance Bill 2017- legislation and explanatory notes