Draft Finance Bill 2016- miscellaneous clauses

Draft Finance Bill 2016- miscellaneous clauses

Fri 18 Dec 2015

Here we summarise some of the less prominent draft clauses for the 2016 finance Bill. These may have been announced before or represent little change in practice but they are all important because they all affect someone.

Capital Gains Tax: disposals of UK residential property by non-residents

These clauses:

  • include non-residents’ CGT (NRCGT) in the scope of the Provisional Collection of Taxes Act, enabling the tax to be collected in the period between the start of a tax year and Royal Assent to that year’s Finance Bill (effective from Royal Assent to FB 2016);
  • ensure that the various forms of CGT applicable to UK residential property held by non-residents (including non-resident close companies) apply in the correct order-
    • gains chargeable at 28% under ATED-related CGT,
    • postApril 2015 gains subject to NRCGT (effective as from 6 April 2015),
    • any amount of chargeable gain that does not fall within the first two (most commonly gains of non-resident close companies attributed to participators (effective as from 25 November 2015); and
    • introduce the power for HMRC to waive a taxpayer’s obligation to make an NRCGT return (effective from Royal Assent to FB 2016).

The power to waive the requirement to make a return is intended to reduce the administrative burden on taxpayers who are not liable to NRCGT but are strictly required to make an NRCGT return solely to notify HMRC that they have disposed of a UK residential property interest.

Income Tax: treatment of income from sporting testimonials

A £50k maximum is to be imposed on all testimonials to employed sports players. This stems from the withdrawal of concessional treatment whereby non-contractual, non-customary testimonials were not regarded as taxable.

Testimonials provided by contract or as a matter of custom (e.g. for professional cricketers where clubs may customarily offer testimonials to long-serving or popular players) are already regarded by HMRC as taxable but other, voluntary testimonials were not. That practice is regarded by HMRC as an ultra vires concession following R (Wilkinson) v Inland Revenue Commissioners 2005. Therefore in the absence of the new statutory exemption all employed players’ testimonials would have been taxable.

The new provision comes into effect for testimonial events held on or after 6 April 2017, where the testimonial was awarded on or after 25 November 2015. In other cases, the sums paid to players will continue to benefit from HMRC’s current treatment. A player will only be allowed one tax-favoured testimonial year, so the £50k limit is a single lifetime limit. but the limit only applies for a 12 month period beginning with the first event in that testimonial year and any unused amount is lost.

Employers and other persons treated as employers, including benefit committees, will be obliged to operate PAYE and NI on funds that they raise and pay to the player. Consequential amendments to the corporation tax legislation will ensure that the PAYE, NI and the net payment to the sportsperson will be deductible for corporation tax purposes.

Income Tax: personal savings allowance

As announced in the March Budget, from 6 April 2016 the new Personal Savings Allowance (PSA) will effectively abolish income tax on savings for 95% of taxpayers:

  • basic rate taxpayers will be entitled to a Personal Savings Allowance of £1,000;
  • higher rate taxpayers will have half that allowance, £500; and
  • additional rate taxpayers will not get any Personal Savings Allowance.

In an associated reform, banks and building societies will cease to deduct income tax from account interest they pay to customers.

Time limits for submitting self-assessment returns

The draft Finance Bill introduces a four year time limit for submitting self-assessment returns. The new limit applies to returns for 2016/17 with transitional arrangements for earlier years (i.e. all years up to and including 2015/16). This measure follows the case of R (on the application of Higgs) v HMRC which decided that, under the present law, no matter how late an individual submitted a self-assessment return they could not then be charged a penalty for failure to submit, only for lateness. In Higgs the Upper Tribunal (UT) ruled against HMRC who have now accepted the UT’s decision: hence the move to change the law. This time limit applies to cases where HMRC has not issued a notice requiring the taxpayer to file a return.

The effect of the change is that:

  • 2012/13 and earlier years’ returns must be submitted by 5 April 2017;
  • 2013/14 returns must be submitted by 5 April 2018;
  • 2014/15 returns must be submitted by 5 April 2019;
  • 2015/16 returns must be submitted by 5 April 2020;

If HMRC give notice to file a return and self-assessment within the four-year period the taxpayer will always have three months in which to file the return, even if that extends the filing deadline beyond four years.

Income Tax: deductions at a fixed rate

This measure is intended to clarify how the fixed-rate scheme applies to individual partners who work from home; it was first announced in the 2014 Autumn Statement.

Income Tax: employment intermediaries and relief for travel and subsistence

This measure seeks to ensure parity of treatment between agency staff provided through umbrella companies with other workers by providing that they cannot claim tax relief or an NIC disregard on travel and subsistence expenses incurred in ordinary commuting between home and work.

Income Tax: exclusion of energy generation from venture capital schemes

The purpose of venture capital schemes is to encourage risk-investment and energy generation schemes that enjoy subsidies or other forms of state support are now not considered to meet that risk-base criterion.

Income Tax: exemption for trivial benefits in kind

Following a recommendation from the Office for Tax Simplification (OTS) the disregard of trivial benefits in kind (BiKs) is to be put on a statutory basis, replacing the present informal, sometimes inconsistent disregards applied by HMRC. it comes into effect on 6 April 2016 (i.e. for 2016/17). The exemption will apply to BiKs valued at no more than £50 per employee, with an annual maximum total value of £300.

Income Tax: Gift Aid requirements on intermediaries

Intermediaries who arrange collections on behalf of charities but fail to maintain proper gift aid records may be subjected to penalties. DFB creates the power for regulations to be made governing these penalties which will come into effect when those regulations are made.

Netherlands Benefit Act for victims of persecution 1940 to 1945

Payments that the Dutch Government makes to victims of persecution by Nazi Germany and Japan in World War II currently enjoy no exemption from tax. This issue has been highlighted following an EU anti-discrimination claim on which the CJEU ruled that it was discriminatory for persecution compensation payments from Germany and Austria to be exempted but not those from the Netherlands Government. The measure exempts both past and future payments made by the Dutch Government.

Inheritance Tax: compensation and ex-gratia payments for victims of persecution during World War II

Compensation received from the Japanese and German governments as well as ex gratia payments for persecution in World War II are at present exempted from IHT to the extent that they form a part of a person’s estate on death. The DFB legislates this concession and applies it to compensation from the Dutch Government as well as the recently created Child Survivor Fund. The exemption applies to deaths on or after 1 January 2015.

Orchestra Tax Relief

The tax credit relief for companies staging orchestral performances is now given legislative force. The scheme is similar in conception to theatre tax relief but is specifically targeted at musical ensemble performances. A qualifying producer company can claim a 25% enhancement of production costs which may also be surrendered for a payable credit if it creates a loss. Conditions apply with regard to the number of players, composition of the ensemble and type of performance, intended to restrict the range of qualifying performances to serious music presented by reasonably large groups.

The relief only applies where public performance is the main purpose, so game shows, competitions and promotional events are specifically excluded.

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