Draft legislation for Finance Bill 2020-21 and other announcements on 21 July 2020
Let’s Talk TaxCorporate & International Tax-Money Laundering-Topical Tax-VAT
Draft legislation for Finance Bill 2020-21 and other announcements on 21 July 2020
Draft legislation for Finance Bill 2020-21 and other announcements on 21 July 2020
Wed 22 Jul 2020
The Government has released draft legislation and supporting documents for Finance Bill 2020/21 for consultation until 16 September 2020. There were also some new consultations and ‘calls for evidence’ announced.
Included in the ministerial statement dealing with these matters was an announcement on the extension of making tax digital (MTD). The extension will mean the following:
- From April 2022, the programme (MTD for VAT) will be extended to all VAT registered businesses with turnover below the VAT threshold (£85,000);
- From April 2023, MTD will apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually;
- There will be an Autumn consultation on the detail of extending MTD to incorporated businesses with Corporate Tax obligations.
There is further detail on the MTD extension from HM Treasury and HMRC. There is also a publication on ‘Building a modern trusted tax administration system’ setting out a ten year strategy. It indicates discussions with key stakeholders will take place over the summer on plans to develop this system.
These are important developments, but it is clear the major announcements on tax have been left to the Autumn Budget.
To discuss the implications for you and your business of any of the points arising from these announcements, please get in touch with your usual Mazars contact or a member of the Mazars Tax team.
The Finance Bill 2020/21 measures announced are as follows:
Income tax
- Changes to the treatment of termination payments and post-employment notice pay (PENP) for Income Tax. This measure refines the way tax is levied on termination payments for those employees whose pay period is defined in months, but their contractual notice period or post-employment notice period is not a whole number of months. It also aligns the tax treatment of PENP for individuals who are non-resident in the year of termination of their UK employment with the treatment for all UK residents. Currently, PENP is not chargeable to UK tax if an employee is non-resident for the tax year in which their employment terminates. It will apply to those individuals who have their employment terminated, and where the termination payment is received on or after 6 April 2021.
- Income Tax changes to the van benefit charge from 6 April 2021 This measure amends existing legislation to reduce the van benefit charge (VBC) for zero emissions vans to £nil. VBC for zero-rated vans is currently a proportion of the flat-rate charge payable by an employee provided with a company van by their employer that can be used privately, except for what is substantially ordinary commuting. It will have effect on or after 6 April 2021.
- Pension schemes: collective money purchase benefits. This measure will enable collective money purchase pension schemes to operate as UK registered pension schemes, in the same way that existing UK registered pension schemes can operate
- Changes to working time requirements for Enterprise Management Incentives. Finance Bill 2020 introduced a time-limited exception to the disqualifying event rules so that existing participants of EMI schemes are not forced to exercise their options much earlier than planned. The proposed new FA 2020 s107 extends the time-limited exception to new EMI share options granted on or after 19 March 2020. The modifications take effect from 19 March 2020 and will come to an end on 5 April 2021.
Corporation tax
- Technical amendments to the Corporate Interest Restriction for Corporation Tax. The CIR legislation will be amended to:
- Clarify the way special provisions in the Corporate Interest Restriction rules apply in the context of a Real Estate Investment Trust, to take into account that UK property businesses of non-resident companies are now within the charge to Corporation Tax rather than Income Tax (section 452) – from 21 July 2020.
- Make sure that no penalties arise for the late filing of an Interest Restriction Return if there is a reasonable excuse for the failure, bringing the administrative rules in line with those for Corporation Tax Self-Assessment (Schedule 7A). This proposal will be treated as having effect from 1 April 2017.
Stamp Duty land Tax and Annual Tax on Enveloped Dwellings draft legislation
- New rates of Stamp Duty Land Tax for non-UK residents from 1 April 2021 This measure sets out draft legislation for the additional 2% SDLT charge that will become payable from 1 April 2021 by non-resident purchasers (including UK companies controlled by non-UK persons) of residential property in England and Northern Ireland. There are specific exclusions from the additional 2% charge for UK REITs and OEICs. A different non-residence test applies to individuals for SDLT compared to income tax (so, for example an individual may be UK tax resident for income tax, but not UK resident for SDLT). A company that is not an excluded company, but that is within the charge to UK corporation tax, and that is controlled by a non-UK company will be regarded as non-UK resident for SDLT purposes and therefore subject to the additional 2% charge.
- New reliefs from Annual Tax on Enveloped Dwellings and Stamp Duty Land Tax for housing co-operatives. This measure sets out draft legislation for an ATED exemption for housing cooperatives that are not registered providers of social housing.
VAT draft legislation
Anti-avoidance legislation
- New proposals for tackling promoters and enablers of tax avoidance schemes. These proposals aim to: enable HMRC to issue ‘stop notices’ more effectively; prevent promoters from abusing corporate entity structures to avoid their obligations under the POTAS rules; assist HMRC in obtaining information sooner on abusive arrangements; assist HMRC to act quickly and decisively where promoters fail to provide information on their avoidance schemes under DOTAS; makes further technical amendments to improve the effectiveness of the rules affecting promoters of tax avoidance schemes.
Other legislation
- New tax checks on licence renewal applications This measure introduces a new tax check for applications to renew some licenses. This will address part of the hidden economy. The measure will have an effect on applications made from 4 April 2022.
- Amendments to HMRC’s civil information powers This measure provides HMRC with new powers to issue a financial institution with a ‘financial institution notice’. The measure will have effect on and after the date of Royal Assent to Finance Bill 2020-21.
A selection of the consultations or calls for evidence includes:
- A call for evidence on modernisation of the stamp taxes on shares framework. This consultation considers what the principles and design of a new framework for Stamp taxes on shares (STS) should be, and prioritising changes within the overall modernisation programme. It includes reference to temporary changes to STS processes which have been made as a response to measures put in place to stop the spread of coronavirus (COVID-19).
- A consultation on an economic crime levy which would be paid by those registered for AML purposes. The proposal is to raise £100m annually (there are around 90,000 AML registered businesses. The levy will be set so that those with more activity will contribute more.
- A call for evidence on business rates. There is a range of question asked about the way business rates are currently handled. There are also some questions for comments on ‘capital value tax’ (CVT) as a replacement for business rates. CVT is considered as one option for replacing business rates. The ministerial statement defers the next revaluation of non-domestic property in England from 1 April 2022 to 1 April 2023. So that it better reflects the impact of COVID19, it will be based on property values as of 1 April 2021.
- A consultation on extending the range of costs qualifying for R&D tax relief to data and cloud computing was issued today. There is also a question on whether the scope of indirect qualifying costs is right. Comments are requested by 13 October 2020.
- A call for evidence on pensions tax relief administration. A low-earning individual’s take-home pay will be affected by the method of pensions tax relief operated by their pension scheme (where they pay no tax). The consultation looks at four possible alternatives: (1) paying a bonus based on Real Time Information (RTI) data; (2) a standalone charge on Relief at source (RAS) schemes; (3) employers operating multiple schemes; (4) mandating the use of RAS for defined contribution schemes.
Ensure digital links are in place to meet MTD for VAT deadlines
This is a reminder that if there is difficulty meeting the digital links requirement for UK making tax digital (MTD) for VAT within the ‘grace period’ permitted it is possible to get an extension, but this requires an application to HMRC – see 4.2.1.3 in VAT Notice 700/22. The grace period ceases with effect from […]
Are you caught by the pensions lifetime allowance cut?
April 2014 sees the pension lifetime allowance (LTA) cut from £1.5 Million to £1.25M. HMRC estimate that 30,000 people will be immediately affected by the cut and the consequences of breaking the limit are significant, a potential 55% tax charge on a part of your pension funds. The lifetime allowance (LTA) is the maximum amount […]
Interest with a UK source? Upper Tribunal says multifactorial approach required in Ardmore and Perrin:
The Upper Tribunal (UT) has upheld the First Tier Tribunal (FTT) decisions in the joined cases of Perrin and Ardmorewhich both concerned the obligation to deduct income tax from interest arising in the UK and paid to overseas loan creditors. Perrin concerned the obligation of an individual and Ardmore a company but nothing turned on this […]
Scottish income tax rate 2016/17 announced on 16 December
The Scottish National Party will present its draft Budget at Holyrood on 16 December. Scotland’s draft Budget was deferred from its usual time in September to allow the SNP Government to take account of Chancellor Osborne’s spending plans for the UK as a whole. The Scottish rate of income tax (SRIT) will be the biggest […]
Tax rates and Locks
Leaving aside the niceties of a government feeling it necessary to impose a law on itself it is telling to consider what is and isn’t within the scope of the tax lock. We have been told that the target is for the standard Personal Allowance to reach £12,500 by 2020, i.e. for the year 2020/21. […]
Auto-enrolment – The key question for FDs: How to fund it and still contain payroll costs?
Auto-enrolment – The key question for FDs: How to fund it and still contain payroll costs? Many companies are still finding that preparing for auto-enrolment is their biggest objective and challenge. Mazars’ Employee Benefits team have recently undertaken a series of roadshow workshops to help companies manage this transition and are available to provide advice […]
HMRC seek consultation on salary sacrifice arrangements on reimbursed business expenses
The Government is proposing to stop tax relief advantages being claimed by workers engaged by ‘Umbrella’ companies on reimbursed business expenses that are not generally available to other workers. This will affect those workers who provide their services via employment intermediaries (umbrella companies) and who have put in place ‘salary sacrifice’ arrangements in order reduce […]
Autumn statement document sets cat among pigeons on listed companies’ returns of capital
A tax change that the Chancellor didn’t mention in the House of Commons today will increase tax on shareholders of quoted companies that make a return of capital or pay a special dividend. These groups often give shareholders the choice of receiving the cash in income or capital form. Many shareholders don’t use their annual […]
Withdrawing concession to hit more professionals than HMRC claims
HMRC proposes to withdraw, with effect from 6 April 2016, the concession in EIM 03002 which allows professional practitioners to treat incidental income from offices/employments as part of their trading/professional income for income tax (but not NIC) purposes.
Doomed to be misquoted?
Occasionally a Tax Case is published and, even at its first reading, the heart of the experienced tax investigations practitioner sinks as he realises that the case is likely to be misquoted by HMRC as supporting such-and-such a principle. For instance, the recent case of Daniel Pittack v HMRC ([2014] UKFTT 670) which was heard […]
Banks’ bonus schemes using restricted securities provisions successfully avoided income tax and NIC
In a decision that is now of historic interest as regards the particular scheme, the Court of Appeal decided that employees’ receipts under schemes implemented by Deutsche Bank (DB) and UBS in early 2004 were exempt from tax under provisions in ITEPA 2003 Part 7 as applicable at that time. A receipt that would otherwise […]
How groundbreaking is the new Social Investment Tax Relief?
Gifts to charities – whether of cash, shares or land – have for many years attracted an income tax write off. However for the first time the Social Investment Tax Relief (SI Relief) gives income tax breaks (as well as capital gains deferrals) on equity or debt investments in charities and other social enterprises. Social […]
Changes to the taxation of distributions on a winding up
The changes to the taxation of dividends from 6 April 2016 will see the differential between the rate of income tax on a distribution (up to 38.1%) and that of capital gains tax (as low as 10%, where entrepreneurs’ relief is available) at its greatest in recent years. In anticipation of this, a number of […]
High profile ‘Working Wheels’ tax scheme fails
Last weekend’s press had headline stories of the First Tier Tribunal (FTT) decision in Flanagan & Others v HMRC that the “working wheels” tax scheme was not effective. The press particularly highlighted the involvement of Chris Moyles, the former Radio 1 DJ. Three matters were considered by the Tribunal: were the participants carrying on a […]
LLPs – ‘Salaried Members’ to be Taxed as Employees
On 21 February 2014 HMRC issued a Revised Technical Note and Guidance on the Salaried Members Rules for LLPs. It is clear the Government is pressing ahead with these changes despite significant resistance. These rules, as proposed, will apply from 6 April 2014 where members of LLPs are engaged on terms similar to employees rather […]
OTS Review of Employee Benefits and Expenses
The Office of Tax Simplification (OTS) has now issued its second report on its review of employee benefits and expenses and the complexities in current legislation in this area. This report suggests radical reforms, building on the interim report issued in August 2013. However, it does not cover accommodation benefits and termination payments, which will […]
Waived dividends taxable under settlements rules
In P Donovan and related appeal (TC03188) the First Tier Tribunal rejected taxpayers’ appeals against HMRC’s determination that dividends paid to their wives should be assessed on them under ITTOIA 2005 s 624 (settlements in which the settlor retains an interest). Messrs. Donovan and McLaren each owned 40 ordinary shares (40%) of the company […]
Doctor fails in his bid for tax deduction for travelling expenses
In Dr Samad Samadian v HMRC [2014] UKUT 13 the Upper Tier Tribunal entirely confirmed the First Tier Tribunal’s (FTT) decision .The case concerned whether tax relief was available for the travelling expenses Dr Samadian incurred in travelling between different places of work, including his home. Dr. Samadian was employed by the NHS and provided […]
Remittance basis to be denied for some non-doms’ dual contracts
Changes announced in the Autumn Statement aim to prevent non-doms from using artificially constructed dual contracts to channel remuneration derived from UK employment through overseas employments to avoid UK tax by claiming the remittance basis. The changes included in the draft Finance Bill, which are subject to consultation, will exclude directors, senior employees and the […]
Taxpayer taking the initiative to bring HMRC enquiry to a close
Under self-assessment, if HMRC are not satisfied with a taxpayer’s return an enquiry is opened. There is no statutory time period within which HMRC have to complete their enquiry. Only once a closure notice is issued by HMRC can the taxpayer bring a formal challenge to the line being taken by HMRC. The taxpayer has […]
SI 2014/Draft The International Tax Compliance (Crown Dependencies and Gibraltar) Regulations 2014
HMRC expects to pass the necessary secondary legislation to activate the information exchange agreements with the Isle of Man, Guernsey, Jersey and Gibraltar as from 31 March 2014 and is consulting on the precise form of the SIs required. This is the expected follow-up from the signing of those agreements and will lead to HMRC […]
First Tier Tribunal rejects HMRC ‘hope value’ argument and allows negligible value relief
In TC03118: Robert Brown the taxpayer claimed income tax relief on the basis that shares had become of negligible value. The only point of contention was whether the shares were actually of negligible value at 2006, the point at which the claim was made. The company was involved in research and development activity to develop […]
RDR3: guidance note on the statutory residence test
In December HMRC published a new guidance note, RDR3 which provides specific guidance on the statutory residence test (SRT). This guidance sits alongside the existing guide RDR1 – Residence, domicile and the remittance basis. Note – these are the only two guides in the RDR series so far. As at 9 January 2014 there is […]
Draft Finance Bill clauses- like unwrapping Christmas presents early
OK, we couldn’t resist: like kids staring at the goodies under the tree we just had to start opening our draft Finance Bill goodies early. And just like those kids we now just feel disappointed and queasy in about equal measure. Not for life, and won’t even see out the 12 days of Christmas, Patent […]
HMRC issue draft guidance on new exemption for trivial benefits in kind
HMRC have issued draft guidance on the tax exemption for low value or ‘trivial’ benefits in kind, which is to be introduced from 6 April 2016. This new exemption will prevent companies from having to charge such benefits to tax (which would generally be dealt with though a PAYE settlement agreement) or agree concessionary treatment with […]
The Freedom of Information Act – A Right without Bite?
It’s nearly 20 years since the Freedom of Information Act 2000 (FOIA) was created. The Act was designed to create a public right of access to previously-inaccessible information held by public authorities but over the years concerns have been raised that FOIA is effectively “toothless” as the legislation contains numerous exemptions which allow public authorities […]
Yet another nail in the coffin for offshore arrangements?
The UK Government has introduced a raft of legislation to address tax evasion and latterly tax avoidance. This has included; The Requirement to Correct legislation which has introduced punitive offshore penalties and extended assessing time limits for Income Tax, Inheritance Tax and Capital Gains Tax to 5 April 2021 and, Enhancing automatic exchanges of information […]
UK income tax on Offshore Receipts in respect of Intangible Property – amendments to the rules and draft guidance
Finance Act 2019 introduced income tax on income of non-UK residents that was generated from UK sales exceeding £10m annually, and which derive from intangible property. This new measure applies from 6 April 2019, though there are a number of exclusions. A draft statutory instrument has been produced amending the rules, along with draft guidance […]
The benefits of an Independent Review by HMRC
The Taxes Acts allow taxpayers to ask for an independent review of an appealable decision by HMRC. The review is carried out by an independent officer within HMRC’s Appeals and Reviews teams. However, recent evidence suggests that many taxpayers remain ignorant of their right to seek such a review, how to go about it or […]
Offshore Royalty Payments
The Government will apply income tax to offshore businesses making offshore royalty payments in respect of intangible property used to generate UK sales. This will apply from 6 April 2019. The charge will apply unless the entity is UK resident or tax resident in a jurisdiction with which the UK has a double tax treaty with […]
Draft Welsh Budget for 2019/20
The Welsh Government has published its Budget proposals. Pages 16 – 22 of the Outline Budget Narrative cover tax policy and tax rates. In summary the highlights are: Welsh rates of income tax will not differ from those in the rest of England & Wales for the first year (so the basic rate will be […]
Making tax digital (MTD) for VAT – HMRC guidance on what business can do to get ready
HMRC has issued guidance on MTD – how VAT business and other VAT entities can get ready for the 1 April 2019 commencement date for those VAT businesses that are above the £85,000 VAT registration threshold. Part of the requirements for MTD for VAT is that information is digitally transferred from accounting records through an […]
Last Chance – Do you need to notify HMRC of a Requirement to Correct disclosure before 30 September 2018?
Less than a week to go before the Requirement to Correct (RTC) deadline of 30 September 2018 elapses. RTC requires taxpayers to make a disclosure of any undeclared tax (Income Tax, Capital Gains Tax and Inheritance Tax) arising before the 6 April 2017 from offshore matters or transfers. The 30 September is also a significant […]
Finance Bill 2018-19 – tax administration points
Included in the draft finance bill legislation issued on 6 July 2018 on those measures affecting tax administration, were provisions relating to extension of offshore time limits for assessing certain taxes, extension of the security deposit regime, and profit fragmentation. HMRC has requested comments on the draft legislation by 31 August 2018. There were also […]
Making tax digital (MTD)
HMRC’s latest agent update includes comments on the procedures for agents signing clients up for MTD. It highlights the need to have MTD compatible software. A May 2018 HMRC webinar aimed at agents considering signing clients up to the MTD Pilot in preparation for its introduction in April 2019 can be found here (this requires […]
UK Government does the dance of transparency!
In a backbench revolt on 1 May 2018 the UK Government was forced to back new legislation which will introduce public ownership registers in Britain’s 14 overseas territories. The concept of public ownership registers was originally proposed by David Cameron and George Osborne back in 2013 and was to apply to non-UK companies following the […]
Employment status of individuals working through personal service companies
The potential application of IR35 legislation to deem the receipts of personal service companies to be employment income of the individuals operating through them, has been high profile news recently. Applying the IR35 legislation may not always be straight forward where the circumstances of a contract have some, but not all of the characteristics of […]
A Budget for Working Families?
The government made a commitment to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this parliament. The measures announced today have been billed as a step towards achieving this objective. The personal allowance for 2017/18 will be set at £11,500 and the basic rate limit will […]
The Advertising Standards Authority stamps on misleading tax claims
In its pursuit of stamping out tax avoidance HMRC complained to the Advertising Standards Authority (ASA) about misleading tax claims by the promoter, CDP Tax & Wealth Limited, which trades under the name Fiducia Wealth and Tax (FWT). FWT’s website advertised a tax planning scheme which it said could reduce Stamp Duty Land Tax bills […]
Self-funded work related training
One of the areas where a consultation was announced was training; specifically the difference in treatment between training that an individual funds personally and that paid for by an employer. This is a key area of Government focus given the need to grow the UK economy, to innovate and to increase productivity. The consultation seeks […]
Making tax digital (MTD) for VAT
A regulation (SI 2018/261) amending the VAT regulation SI 1995/2518 has been issued providing that VAT registered businesses above the VAT registration threshold must keep electronic records and use an approved form of functionally compatible software to prepare and submit VAT returns via an application programming interface (API). It will not be possible to use […]
Scottish and Welsh taxes update
The process of devolving tax powers is well underway and we can expect to see a number of major changes in the following months and years. As regards Scotland, Revenue Scotland (RS) have an excellent web-site (which can be accessed here – including a regular Technical Bulletin) which contains a large amount of useful information […]
A corporation tax (CT) loss can be offset against profits subject to income tax (and also profits subject to CT)
The Upper Tribunal (UT) has held that it is possible for a non-UK resident landlord of UK property (English Holdings (BVI) Ltd), which also had a UK PE undertaking a trade, to offset the loss of the PE’s trade (subject to corporation tax) against the profits of the non-resident landlord business (subject to income tax). […]
More anti-avoidance legislation on its way for offshore trusts
The documentation supporting the Chancellor’s 2017 Autumn Budget included confirmation that the draft anti-avoidance legislation published in September will come into effect from 6 April 2018, with only a few very minor updates. The purpose of the legislation is to tax payments from an offshore trust that are intended for UK individuals that may otherwise […]
HMRC roots out yet another success…
The recent decision in HMRC v Root2tax Ltd and Root3tax Ltd [2017] UKFTT 696 (TC) has demonstrated yet again HMRC’s determination to challenge promoters of tax planning arrangements who fail to disclose under DOTAS (Disclosure of Tax Avoidance Schemes) schemes that seek to obtain a tax advantage. The case before the First Tier Tribunal (FTT) […]
Trouble aboard the good ship HMRC?
It is said that the real sign that a ship is in trouble is not when the rats jump overboard but when the officers abandon it mid-voyage. If that’s the case, HMRC appears to be sinking because a number of its most Senior Members have departed in recent months. That well known magazine Private Eye […]
Making Tax Digital – Delayed but still coming
The Government’s proposal for Making Tax Digital have come into pretty widespread criticism, not least from the Public Accounts Committee. Criticisms have ranged from it being unworkable and unrealistic to costly and ultimately unnecessary – yet HMRC and the Government appear intent on clinging to the wreckage, despite every indication that this particular boat might […]
New royalty withholding rules effective from 28 June 2016
The government announced at the Budget on 16 March 2016 that legislation would be introduced in Finance Bill 2016 to reform the rules governing the deduction of income tax at source from payments of royalties. At the time, a detailed Technical Note was issued by HMRC covering the various issues. Of the various reforms, the […]
Channel Islands Securities Exchange Authority is now a Recognised Stock Exchange
HMRC has designated the market operated by The Channel Islands Securities Exchange Authority Limited as a recognised stock exchange under Section 1005 (1) (b) Income Tax Act 2007 with effect from 20 December 2013. Therefore as from 20 December 2013 all securities admitted to trading and listed on this market are: ‘listed’ for income tax […]