Draft measures for Finance Bill 2017/18

Wed 27 Sep 2017

Draft clauses for eight measures scheduled for the Autumn Statement Finance Bill (FB 2017-2018) were published on 13 September for consultation. To discuss how any of the above measure could affect you or your business, please get in touch with your usual Mazars tax contact

The eight measures are:

• 1. Bank levy: changes to scope and administration.  These measures change the scope of the bank levy and simplify some of the compliance rules with effect for periods of account ending on or after 1 January 2021.  New rules on joint and several liability of group members will have effect for periods of account ending on or after 1 January 2018.  Changes in relation to the nomination of a group’s responsible member will have effect on and after the date of Royal Assent to Finance Bill 2018 (presumably to be published in Autumn 2018).
• 2. Draft legislation: tackling disguised remuneration – avoidance schemes. The existing use of disguised remuneration avoidance schemes will be tackled by the new charge on disguised remuneration loans that remain outstanding on 5 April 2019.  This is being legislated in Finance Bill 2017 currently before Parliament (Finance Bill 2017-2019 clauses 34-37 and schedules 11 and 12).  Further clauses are now published covering:
  • A new close companies’ gateway and double tax relief provisions
  • New information requirements for the loan charge

The new measures will take effect from 6 April 2018, except where the provision relates to corporation tax when it takes effect from 1 April 2018.

HMRC has also published a technical note, which is available through the above link.

• 3. Income tax: debt traded on a multilateral trading facility – withholding tax exemption. Legislation will be introduced to amend section 987 of ITA 2007 (meaning of ‘quoted Eurobond’) so that the definition of a quoted Eurobond is extended to include securities admitted to trading on a MTF operated by an EEA-regulated recognised stock exchange, thus extending the interest to which exemption from withholding tax can apply.  This takes effect for interest payments made on or after 1 April 2018.A response document to the original consultation is also published.
• The legislation similarly amends the definition of ‘investment bond arrangements’ in TCGA 1992 s.151N, ITA 2007 s.564G and CTA 2009 s.507.  These deal with Shari’a compliant financial instruments also known as sukuk. This takes effect for the 2018/19 tax year onwards for income tax and from 1 April 2018 for corporation tax.  These changes are intended to increase the competitiveness of the UK as a trading venue for corporate debt.
• 4. Landfill tax: disposals not made at landfill sitesWith effect from 1 April 2018 this measure extends the scope of Landfill Tax to disposals made at sites without an environmental disposal permit, and brings clarity to what material is taxable at sites that do have a permit.  A response document to the 20 March 2017 consultation on the issue is also published.  (Landfill Tax was devolved to Scotland in April 2015 and will be devolved to Wales from April 2018, therefore these changes will not apply to sites in Scotland and Wales.)
• 5. Offshore trusts anti-avoidance.  These measures take effect from 6 April 2018 and provide for the following:
  • where capital payments are made to a close family member of a UK resident settlor, the capital payments will be taxable as if they were received by the settlor under a modified version of TCGA 1992 s.87.
  • Capital payments to a non-resident made on or after 6 April 2018 won’t be matched against the pool of trust gains for the purposes of section 87, regardless of the domicile status of the settlor and whether or not the recipient of the payment is the settlor or another beneficiary of the trust.
  • ITTOIA 2005 will be amended so that where a benefit is provided to a close family member of a UK resident settlor, the benefits are taxable as if they were received by the settlor.
  • Amendments will also be made to TCGA 1992, ITTOIA 2005 and ITA 2007 to ensure that capital payments or benefits received by individuals who don’t pay tax on the distribution (because they are either non-resident or are non-domiciled remittance basis users who do not remit the payment) and that person then makes an onward gift to a UK resident, the recipient (the UK resident) is treated as if they had received a capital payment or benefit from the trust equal to the amount of the gift.
• 6. Partnership taxation: proposals to clarify treatment.  Draft legislation is provided to implement a number of proposals arising from the Partnership taxation consultation.  The consultation response document issued on 20 March 2017 indicated the measures take effect for accounting periods starting on or after 5 April 2018,.
  • Partners in nominee or bare trust arrangements. This change clarifies that where a beneficiary of a bare trust is entitled absolutely to any income of that bare trust consisting of profits of a firm, but is not themselves a partner in the firm, then they are subject to the same rules for calculating profits etc and reporting as actual partners.  This has effect from 6 April 2018 for income tax and 1 April 2018 for corporation tax.
• Partnerships with partnerships as partners. A partnership that has partners that are themselves partnerships (participating partnerships) will be required to include, for each of the participating partnerships, the share of the partnership’s income or loss calculated on all four possible bases of calculation unless details for all the partners and indirect partners are included on the partnership statement.  These measures will have effect for partnership tax returns relating to the 2018/19 tax year onwards.
• Investment partnerships. Partnerships that don’t carry on a trade or profession or a UK property business won’t be required to return the tax reference for a partner if that partner is not chargeable to Income Tax or Corporation Tax in the UK and the partnership reports details of the partner to HMRC under the CRS.  These provisions will have effect for tax returns made on or after the date of Royal Assent.
• Partnerships that are partners in another partnership. If a partnership (the reporting partnership) is a partner in one or more partnerships that carry on a trade, profession or business then the legislation will make clear that the profits or losses from each partnership must be shown separately, and separately from any other income or losses, on the reporting partnership’s return. These changes will have effect for the 2018/19 tax year onwards.
• Allocation and calculation of partnership profit for tax purposes. It will be made clear that partnership profits for tax purposes must be allocated between partners in the same ratio as the commercial profits.  This will have effect for periods of account beginning on or after the date of Royal Assent.
• Allocation of partnership profits determined by the partnership statement. It will be made clear that the allocation of partnership profits shown on the partnership return is the allocation that applies for tax purposes for the partners and introduces a new process to allow disputes over the correctness of the allocation of profit (or loss) for tax purposes to be referred to the tribunal to be resolved. Disputes over the quantum of partnership profits are not within the scope of the new process.  This provisions will have effect for tax returns relating to the 2018/19 tax year onwards.
• 7. Pension tax registration With effect from 6 April 2018 this measure extends HM Revenue and Customs’ (HMRC) powers to refuse to register, and to de-register pension schemes to those which are master trusts and don’t have authorisation from the Pensions Regulator under their new authorisation and supervision regime, and to those pension schemes with a dormant company as a sponsoring employer.
• 8. Termination payments: removal of foreign service relief For employments terminated on or after 6 April 2018, employees who are UK resident in the tax year their employment is terminated will no longer be eligible for foreign service relief on their termination payment. Foreign service relief currently allows qualifying individuals to be either completely exempted from Income Tax on their termination payment or have the taxable amount reduced. Instead, those who have worked abroad but are resident in the UK in the year their employment is terminated will be taxed in the same way as others who have not worked abroad. They will continue to benefit from the existing £30,000 income tax exemption and an unlimited employee National Insurance contributions (NICs) exemption for payments associated with the termination of employment. Note that the foreign service exemption is however being retained for seafarers.