The government put forward two sets of amendments for consideration of the House of Commons during the ‘Committee of the Whole House’ stage, which is the first time changes to the Bill are debated and approved.
On the first day of those proceedings (19 April), amendments were agreed to Sch 22 (relief from stamp duty land tax for freeport sites). The amendments apply to property acquisitions in freeport tax sites using certain sharia-compliant, alternative finance (AF) arrangements, and provide for SDLT freeports relief to be available for these acquisitions by looking at the intended use of the land by the ‘relevant person’ rather than the ‘financial institution’. The change will be effected by adding a new Part 3A into new FA 2003 Sch 6C which will introduce relief from SDLT for certain purchases of land in freeport tax sites.
On the second day (20 April), amendments were agreed to Sch 7 (hybrid and other mismatches), as follows:
The original version of the Bill would have amended the definition of ‘territory’ so that, broadly, the tests to determine whether an entity is opaque/transparent would be determined by reference to the law where the entity is incorporated and its investors are resident. These changes have now been removed and the government intends instead to introduce revised legislation ‘in the next Finance Bill’ and which will have effect retroactively from 1 January 2017 (when the hybrid mismatch rules came into effect).
The meaning of ‘corporate rescue conditions’ (in new TIOPA 2010 s 259NEF(3)) in connection with the treatment of deductions for the release of a debt has been clarified.
New sub-s (9A) will be inserted into TIOPA 2010 s 259EC, and a new sub-s (4A) into the new s 259ICA, to cover the possibility that a zero-tax territory may not recognise the concept of residence for tax purposes.
New sub-ss (7)–(7D) in TIOPA 2010 s 259KA will be substituted (condition E for where Part 6A Chapter 11 on imported mismatches applies) to provide that, where a mismatch is capable of being dealt with in a country that has implemented rules in accordance with the OECD’s hybrid mismatch arrangements report, it will not be dealt with by the UK.
Nick Evans, senior tax adviser at Baker McKenzie, observed: ‘The government has scrapped its proposed amendments to the definition of a “hybrid entity” found at TIOPA 2010 s 259BE, after identifying unintended consequences arising from the changes. The amendments originally proposed were primarily to remove US LLCs from the scope of the hybrid-mismatch rules. The government still intends to deal with this point, with retroactive effect, but will now wait until the next Finance Bill to do so, which will likely be in 2022.’
On 20 April, the government published the following three sets of amendments to the Finance Bill (for Public Bill Committee stage):
Sch 2 (temporary extension of carry-back of trade losses): para 3(5) has been removed. This clarifies that relief under Part 1 of Sch 2 is not available to a furnished holiday lettings business that is treated as a trade under ITA 2007 s 127.
Sch 5 (collective defined contribution pension schemes): in para 20, references to the Pension Schemes Act 2021 s 87(7)(b) have been added to ensure that new FA 2004 Sch 28 para 2(10) (as inserted by para 20 of the Bill) which deals with benefits payable by a collective money purchase scheme in the event of its being wound up, operates correctly in relation to a scheme governed by the law of Northern Ireland.
Sch 28 (VAT late payment interest and repayment interest): in the new Part 2A inserted into FA 2009 Sch 54 (repayment interest), new para 12E is deleted. This removes the provision that would have prevented an amount of VAT credit from carrying repayment interest under Sch 54 for a period referable to the raising and answering of an inquiry by HMRC or the correction by HMRC of errors or omissions in a VAT return.
Meanwhile, the government is inviting anyone who has ‘relevant expertise and experience or a special interest’ in the Finance Bill to submit views to the Public Bill Committee ahead of the Committee’s consideration of remaining provisions of the Bill. Comments should be submitted by email to scrutiny@parliament.uk. The Committee is scheduled to finish its work by 6 May 2021 at the latest, so submissions need to be made as soon as possible.
The government put forward two sets of amendments for consideration of the House of Commons during the ‘Committee of the Whole House’ stage, which is the first time changes to the Bill are debated and approved.
On the first day of those proceedings (19 April), amendments were agreed to Sch 22 (relief from stamp duty land tax for freeport sites). The amendments apply to property acquisitions in freeport tax sites using certain sharia-compliant, alternative finance (AF) arrangements, and provide for SDLT freeports relief to be available for these acquisitions by looking at the intended use of the land by the ‘relevant person’ rather than the ‘financial institution’. The change will be effected by adding a new Part 3A into new FA 2003 Sch 6C which will introduce relief from SDLT for certain purchases of land in freeport tax sites.
On the second day (20 April), amendments were agreed to Sch 7 (hybrid and other mismatches), as follows:
The original version of the Bill would have amended the definition of ‘territory’ so that, broadly, the tests to determine whether an entity is opaque/transparent would be determined by reference to the law where the entity is incorporated and its investors are resident. These changes have now been removed and the government intends instead to introduce revised legislation ‘in the next Finance Bill’ and which will have effect retroactively from 1 January 2017 (when the hybrid mismatch rules came into effect).
The meaning of ‘corporate rescue conditions’ (in new TIOPA 2010 s 259NEF(3)) in connection with the treatment of deductions for the release of a debt has been clarified.
New sub-s (9A) will be inserted into TIOPA 2010 s 259EC, and a new sub-s (4A) into the new s 259ICA, to cover the possibility that a zero-tax territory may not recognise the concept of residence for tax purposes.
New sub-ss (7)–(7D) in TIOPA 2010 s 259KA will be substituted (condition E for where Part 6A Chapter 11 on imported mismatches applies) to provide that, where a mismatch is capable of being dealt with in a country that has implemented rules in accordance with the OECD’s hybrid mismatch arrangements report, it will not be dealt with by the UK.
Nick Evans, senior tax adviser at Baker McKenzie, observed: ‘The government has scrapped its proposed amendments to the definition of a “hybrid entity” found at TIOPA 2010 s 259BE, after identifying unintended consequences arising from the changes. The amendments originally proposed were primarily to remove US LLCs from the scope of the hybrid-mismatch rules. The government still intends to deal with this point, with retroactive effect, but will now wait until the next Finance Bill to do so, which will likely be in 2022.’
On 20 April, the government published the following three sets of amendments to the Finance Bill (for Public Bill Committee stage):
Sch 2 (temporary extension of carry-back of trade losses): para 3(5) has been removed. This clarifies that relief under Part 1 of Sch 2 is not available to a furnished holiday lettings business that is treated as a trade under ITA 2007 s 127.
Sch 5 (collective defined contribution pension schemes): in para 20, references to the Pension Schemes Act 2021 s 87(7)(b) have been added to ensure that new FA 2004 Sch 28 para 2(10) (as inserted by para 20 of the Bill) which deals with benefits payable by a collective money purchase scheme in the event of its being wound up, operates correctly in relation to a scheme governed by the law of Northern Ireland.
Sch 28 (VAT late payment interest and repayment interest): in the new Part 2A inserted into FA 2009 Sch 54 (repayment interest), new para 12E is deleted. This removes the provision that would have prevented an amount of VAT credit from carrying repayment interest under Sch 54 for a period referable to the raising and answering of an inquiry by HMRC or the correction by HMRC of errors or omissions in a VAT return.
Meanwhile, the government is inviting anyone who has ‘relevant expertise and experience or a special interest’ in the Finance Bill to submit views to the Public Bill Committee ahead of the Committee’s consideration of remaining provisions of the Bill. Comments should be submitted by email to scrutiny@parliament.uk. The Committee is scheduled to finish its work by 6 May 2021 at the latest, so submissions need to be made as soon as possible.
