A Committee of the whole House will debate a selection of clauses and schedules from the Finance Bill on 27 and 28 June. The Bill has been carried over to the new parliamentary session and was given a formal first and second reading without debate on 19 May.
A Committee of the whole House will debate a selection of clauses and schedules from the Finance Bill on 27 and 28 June. The Bill has been carried over to the new parliamentary session and was given a formal first and second reading without debate on 19 May.
On 13 June, the government tabled a number of amendments to be considered by the Committee (see www.bit.ly/1VY9VEy). HM Treasury has also published a set of explanatory notes to accompany the proposed amendments (see www.bit.ly/1roHWRw). The amendments are listed below in the order in which the Committee will debate the relevant clauses and schedules over the two days.
· Clause 7 (Taxable benefits: application of Chapters 5 to 7 of Part 3 of ITEPA 2003) – amendments 22–26: These amendments confirm the government’s policy intention as it was understood before comments made by the Court of Appeal in its March 2016 judgment in Apollo Fuels [2016] EWCA Civ 157. The amendments clarify that where a benefit falls within tax rules specifying how the cash equivalent of that benefit should be calculated, it will remain a taxable benefit even if the cash equivalent has been reduced to nil.
· Clause 14 (Travel expenses of workers providing services through intermediaries) – amendment 27: This amendment corrects a technical error in the original clause which meant that all employment intermediaries (except managed service companies) were required to consider the wider employment status case law tests, rather than simply having to consider whether a worker is under supervision, direction or control. This was not the government’s intention. The change will take effect retrospectively from 6 April 2016. A corresponding NICs correction is made through amending regulations with effect from 6 July 2016.
· Schedule 3 (Employee share schemes: minor amendments) – amendment 28: This amendment preserves the trading activities requirement for a company to receive the tax advantages of an enterprise management incentive scheme where a company is controlled by an employee ownership trust.
· Clause 144 (General anti-abuse rule: provisional counteractions) – amendment 114: This amendment clarifies the information that HMRC must provide in a provisional GAAR counteraction notice. It forms part of a group of amendments to ensure that the GAAR procedural changes work as intended.
· Clause 145 (General anti-abuse rule: binding of tax arrangements to lead arrangements) – amendments 115–179: This group of amendments ensures that the GAAR procedural changes work as intended and amends the National Insurance Contributions Act 2014 to include abusive NICs arrangements in the new GAAR procedures.
· Clause 146 (General anti-abuse rule: penalty) – amendments 82–99: These amendments ensure that where a person is counteracted under the GAAR, and knows that another person has given a return or other ‘tax document’ to HMRC on the basis that a tax advantage arises from the tax arrangements, they will be subject to a GAAR penalty.
· Schedule 18 (Serial tax avoidance) – amendments 100–113: These amendments ensure that those who pursue tax avoidance through partnerships or through companies which they control are brought within the scope of the serial tax avoidance regime.
· Clause 148 (Promoters of tax avoidance schemes) – amendments 69–81: These amendments ensure that those who promote tax avoidance schemes through associated structures, partnerships, or through arrangements including NICs, are brought within the scope of the promoters of tax avoidance schemes (POTAS) regime for the new threshold condition introduced by clause 148 of Finance Bill 2016.
· Clause 73 (Entrepreneurs’ relief: associated disposals) – amendments 30–35: These amendments remove two technical anomalies which would mean that, in some circumstances, a person who had been entitled to relief under the FA 2015 rules on a transaction occurring before Budget 2016 would cease to be entitled because of clause 73. They also change the order in which the conditions that must be met for relief to be due are presented.
· Schedule 13 (Entrepreneurs’ relief: ‘trading company’ and ‘trading group’) – amendments 36–38: These amendments give effect to the government’s intention that the changes announced at Budget 2016, allowing activities of a joint venture company or a partnership to be taken into account in deciding whether a shareholder or partner company is a trading company for the purposes of entrepreneurs’ relief, should be backdated to the introduction of changes introduced by FA 2015, in order to reduce the unintended effects of those earlier changes.
· Schedule 14 (Investors’ relief) – amendments 39–68: This new relief applies a 10% rate of CGT to gains accruing on the disposal of qualifying shares in an unlisted trading company held by individuals. These amendments extend the scope of the relief to apply to trustees of a settlement and shares jointly subscribed for by two or more individuals. They also allow investors who become unpaid directors to qualify for investors’ relief in certain circumstances. In the case of trusts, the amendments also ensure that the amount of investors’ relief available is attributed to and deducted from a qualifying beneficiary’s own individual lifetime limit of £10m.
· Clause 77 (Employee shareholder shares: limit on exemption) – Amendment 29: This amendment maintains the practice of no chargeable gain accruing on reorganisations of share capital involving employee shareholder shares. Clause 77 introduced a lifetime limit of £100,000 on the CGT-exempt gains a person can make on the disposal of shares acquired under employee shareholder agreements entered into after 16 March 2016. Without this amendment, the clause would result in a chargeable gain accruing and CGT being payable on a reorganisation, or similar transaction, involving exempt employee shareholder shares where the shareholder had already used up the whole of the lifetime limit.
The remainder of the Bill will go to a Public Bill Committee, to be concluded by 14 July 2016.
A Committee of the whole House will debate a selection of clauses and schedules from the Finance Bill on 27 and 28 June. The Bill has been carried over to the new parliamentary session and was given a formal first and second reading without debate on 19 May.
A Committee of the whole House will debate a selection of clauses and schedules from the Finance Bill on 27 and 28 June. The Bill has been carried over to the new parliamentary session and was given a formal first and second reading without debate on 19 May.
On 13 June, the government tabled a number of amendments to be considered by the Committee (see www.bit.ly/1VY9VEy). HM Treasury has also published a set of explanatory notes to accompany the proposed amendments (see www.bit.ly/1roHWRw). The amendments are listed below in the order in which the Committee will debate the relevant clauses and schedules over the two days.
· Clause 7 (Taxable benefits: application of Chapters 5 to 7 of Part 3 of ITEPA 2003) – amendments 22–26: These amendments confirm the government’s policy intention as it was understood before comments made by the Court of Appeal in its March 2016 judgment in Apollo Fuels [2016] EWCA Civ 157. The amendments clarify that where a benefit falls within tax rules specifying how the cash equivalent of that benefit should be calculated, it will remain a taxable benefit even if the cash equivalent has been reduced to nil.
· Clause 14 (Travel expenses of workers providing services through intermediaries) – amendment 27: This amendment corrects a technical error in the original clause which meant that all employment intermediaries (except managed service companies) were required to consider the wider employment status case law tests, rather than simply having to consider whether a worker is under supervision, direction or control. This was not the government’s intention. The change will take effect retrospectively from 6 April 2016. A corresponding NICs correction is made through amending regulations with effect from 6 July 2016.
· Schedule 3 (Employee share schemes: minor amendments) – amendment 28: This amendment preserves the trading activities requirement for a company to receive the tax advantages of an enterprise management incentive scheme where a company is controlled by an employee ownership trust.
· Clause 144 (General anti-abuse rule: provisional counteractions) – amendment 114: This amendment clarifies the information that HMRC must provide in a provisional GAAR counteraction notice. It forms part of a group of amendments to ensure that the GAAR procedural changes work as intended.
· Clause 145 (General anti-abuse rule: binding of tax arrangements to lead arrangements) – amendments 115–179: This group of amendments ensures that the GAAR procedural changes work as intended and amends the National Insurance Contributions Act 2014 to include abusive NICs arrangements in the new GAAR procedures.
· Clause 146 (General anti-abuse rule: penalty) – amendments 82–99: These amendments ensure that where a person is counteracted under the GAAR, and knows that another person has given a return or other ‘tax document’ to HMRC on the basis that a tax advantage arises from the tax arrangements, they will be subject to a GAAR penalty.
· Schedule 18 (Serial tax avoidance) – amendments 100–113: These amendments ensure that those who pursue tax avoidance through partnerships or through companies which they control are brought within the scope of the serial tax avoidance regime.
· Clause 148 (Promoters of tax avoidance schemes) – amendments 69–81: These amendments ensure that those who promote tax avoidance schemes through associated structures, partnerships, or through arrangements including NICs, are brought within the scope of the promoters of tax avoidance schemes (POTAS) regime for the new threshold condition introduced by clause 148 of Finance Bill 2016.
· Clause 73 (Entrepreneurs’ relief: associated disposals) – amendments 30–35: These amendments remove two technical anomalies which would mean that, in some circumstances, a person who had been entitled to relief under the FA 2015 rules on a transaction occurring before Budget 2016 would cease to be entitled because of clause 73. They also change the order in which the conditions that must be met for relief to be due are presented.
· Schedule 13 (Entrepreneurs’ relief: ‘trading company’ and ‘trading group’) – amendments 36–38: These amendments give effect to the government’s intention that the changes announced at Budget 2016, allowing activities of a joint venture company or a partnership to be taken into account in deciding whether a shareholder or partner company is a trading company for the purposes of entrepreneurs’ relief, should be backdated to the introduction of changes introduced by FA 2015, in order to reduce the unintended effects of those earlier changes.
· Schedule 14 (Investors’ relief) – amendments 39–68: This new relief applies a 10% rate of CGT to gains accruing on the disposal of qualifying shares in an unlisted trading company held by individuals. These amendments extend the scope of the relief to apply to trustees of a settlement and shares jointly subscribed for by two or more individuals. They also allow investors who become unpaid directors to qualify for investors’ relief in certain circumstances. In the case of trusts, the amendments also ensure that the amount of investors’ relief available is attributed to and deducted from a qualifying beneficiary’s own individual lifetime limit of £10m.
· Clause 77 (Employee shareholder shares: limit on exemption) – Amendment 29: This amendment maintains the practice of no chargeable gain accruing on reorganisations of share capital involving employee shareholder shares. Clause 77 introduced a lifetime limit of £100,000 on the CGT-exempt gains a person can make on the disposal of shares acquired under employee shareholder agreements entered into after 16 March 2016. Without this amendment, the clause would result in a chargeable gain accruing and CGT being payable on a reorganisation, or similar transaction, involving exempt employee shareholder shares where the shareholder had already used up the whole of the lifetime limit.
The remainder of the Bill will go to a Public Bill Committee, to be concluded by 14 July 2016.
