The following is an overview of Finance Bill 2019/20 draft clauses, explanatory notes and tax information and impact notes published for consultation on 11 July 2019. The closing date for comments on the draft legislation is 5 September 2019.
Four items of legislation have immediate or retrospective effect. These concern:
Income tax
Rules for off-payroll working from April 2020
Finance Bill 2020 will extend the public sector reform of the IR35 rules to all engagements with large and medium-sized organisations. This shifts responsibility for operating the off-payroll working rules from the individual’s personal service company to the engaging organisation for contracts entered into, or payments made, on or after 6 April 2020.
HMRC has published its summary of consultation responses.
Taxable benefits and rules for measuring carbon dioxide emissions
Finance Bill 2020 will confirm that all new cars provided to employees and available for private use which are first registered from 6 April 2020 will be taxed according to the CO2 emissions figure measured under the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). Most appropriate percentages for calculating the car benefit charge will be reduced by 2% in 2020/21, then increased by 1% for each of the tax years 2021/22 and 2022/23, bringing the appropriate percentages back to their published rates in 2022/23.
Income Tax relief and the Enterprise Investment Scheme approved knowledge-intensive fund
Finance Bill 2020 will introduce an ‘approved knowledge-intensive fund’ from 6 April 2020 that:
HMRC has published new guidance alongside the draft legislation.
Income Tax and the treatment of expenses for voluntary office holders
Finance Bill 2020 will replace the existing concessionary treatment and create a statutory income tax exemption for payments or reimbursements of reasonable private expenses made to voluntary office holders from 6 April 2020. A Class 1 NICs disregard will be introduced through regulations after Royal Assent to Finance Bill 2020.
Changes to ancillary reliefs in Capital Gains Tax Private Residence Relief
Finance Bill 2020 will:
These changes will apply from 6 April 2020, apart from armed forces’ job-related accommodation, which will apply when the income tax exemption is brought into force by regulations.
HMRC has published a summary of consultation responses.
Corporate capital loss restriction for Corporation Tax
Finance Bill 2020 will introduce a restriction of 50% on the proportion of chargeable gains companies can relieve with carried-forward losses for accounting periods ending on or after 1 April 2020. The £5 million deductions allowance available against the corporate income loss restriction may be shared with companies’ chargeable gains. Gains from basic life assurance and general annuity business (BLAGAB), ring-fence oil-related activities and REITs are excluded from the restriction. Anti-forestalling provisions announced at Budget 2018 apply to any arrangements made on or after 29 October 2018.
HMRC has published a summary of consultation responses.
Capital Gains Tax relief on loans to traders
Finance Bill 2020 will widen the scope of the CGT relief in respect of loans made to traders, where these loans have become irrecoverable, to ensure the relief applies to borrowers located anywhere in the world and not just the UK. The change is made in consequence of a reasoned opinion issued by the European Commission that current UK law breaches the principle of free movement of capital. The change will have effect from 24 January 2019.
Deferral of Corporation Tax payments on EU group asset transfers
Finance Bill 2020 will allow UK companies, or those with a UK permanent establishment, to defer payment of corporation tax for up to five years on assets transferred to a member of the same group of companies resident in another EU or EEA state. The legislation is being introduced in response to the decision of the First-tier Tribunal in Gallaher Ltd [2019] UKFTT 207 (TC) that current UK law, which permits deferral for transfers between companies subject to UK corporation tax, places a restriction on the EU principle of freedom of establishment. The changes apply with immediate effect from 11 July 2019.
Income Tax and Corporation Tax rules for spreading transitional adjustments on new lease accounting
Finance Bill 2020 will ensure that the rules introduced by Finance Act 2019, Sch 14, requiring businesses who adopt the new IFRS 16 to spread the tax impact of any transitional lease accounting adjustment over the term of the lease, will apply to any period of account beginning on or after 1 January 2019 in which the new accounting standard is first adopted.
Share loss relief for Income Tax and Corporation Tax
Finance Bill 2020 will widen the scope of share loss relief to ensure it applies to qualifying investments in companies located anywhere in the world and not just the UK. An additional reporting requirement will be introduced for the claimant to notify HMRC of the tax residency of the company that issued the shares. The change is made in consequence of a reasoned opinion issued by the European Commission that current UK law breaches the principle of free movement of capital and will have effect from 24 January 2019.
Introduction of the new Digital Services Tax
Finance Bill 2020 will introduce legislation for the new digital services tax (DST) with effect from 1 April 2020 at a rate of 2% on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The DST will apply to groups with annual worldwide revenues of more than £500m where more than £25m of these revenues are derived from UK users. An annual allowance means the first £25m of a group’s revenues derived from UK users will not be subject to DST. HMRC has also published a summary of consultation responses and draft guidance.
Transfer of unlisted securities to connected companies for Stamp Duty and Stamp Duty Reserve Tax
Finance Bill 2020 will extend the stamp duty and SDRT market value rule to the transfer of unlisted securities to connected companies, targeted at contrived arrangements where there is an issue of shares by way of consideration for the transfer. The legislation will also amend the rules on disqualifying arrangements to prevent a second stamp duty charge arising on most share-for-share exchanges as part of a partition demerger. These changes will have effect from Royal Assent.
HMRC has also published its summary of consultation responses.
Post duty point dilution for wine and made-wine
Finance Bill 2020 will introduce penalties and forfeiture provisions on wine producers who dilute wine or made-wine after the duty point by adding water (or any other substance), if that addition would, through an increase in volume, have resulted in a greater amount of duty being payable. These measures will take effect from 1 April 2020
Inheritance Tax and excluded property added to and transferred between trusts
Finance Bill 2020 will provide that where property is added to a settlement, the domicile of the settlor will be considered for the purposes of the excluded property rules at the time of the addition rather than at the time the settlement was first created. This will ensure that additions to trusts by UK domiciled or deemed domiciled individuals made when they were non-domiciled are within the scope of IHT. The legislation will also introduce additional excluded property tests. The change will have effect from Royal Assent.
Inheritance Tax treatment of Kindertransport Fund payments
Finance Bill 2020 will provide that Kindertransport survivors’ estates will not be subject to IHT in relation to payments received from the German govevernment’s Kindertransport Fund, whether payments are made to claimants before their death or later to spouses or children. This will apply in relation to deaths on and after 1 January 2019, when the scheme opened.
Rules to measure carbon dioxide emissions for Vehicle Excise Duty
Finance Bill 2020 will confirm that the CO2 emissions figure for vehicle excise duty is to be based on the Worldwide Harmonised Light Vehicle Testing Procedure (WLTP) for all new cars registered from 1 April 2020.
Medical courier charities exemption from Vehicle Excise Duty
Finance Bill 2020 will exempt purpose-built vehicles used by medical courier charities, commonly referred to as ‘blood bikes’, from vehicle excise duty with effect from 1 April 2020, provided the vehicles meet certain criteria.
Changes to protect tax in insolvency cases
Finance Bill 2020 will amend insolvency legislation with effect rom 6 April 2020 to make HMRC a secondary preferential creditor for the distribution of assets in the event of insolvency in respect of taxes collected and held by businesses on behalf of other taxpayers, including VAT, PAYE, employee NICs and construction industry scheme deductions. The rules will be unchanged for taxes owed by businesses themselves, with HMRC remaining an unsecured creditor for corporation tax and employer NICs.
HMRC has published its summary of consultation responses.
Tax abuse using company insolvencies
Finance Bill 2020 will provide for directors and other connected persons to be jointly and severally liable for amounts due to HMRC from companies in cases of ‘phoenixism’ involving insolvency or potential insolvency. The legislation sets out the conditions to be met for HMRC to issue a ‘joint liability notice’ to an individual. The measure will take effect from Royal Assent.
Technical and procedural amendments to the General Anti-Abuse Rule
Finance Bill 2020 will allow HMRC to issue new ‘protective GAAR notices’ to extend the permitted 12-month window for HMRC to gather information and consider whether to continue a GAAR challenge. Taxpayers will have the right to appeal a GAAR adjustment 12 months after the protective GAAR notice is issued. The measure will have effect from Royal Assent. HMRC has published a technical briefing note to explain the changes.
Windrush Compensation Scheme payments exemptions from Income Tax, Capital Gains Tax and Inheritance Tax
Finance Bill 2020 will introduce income tax, IHT and CGT exemptions for payments made under the Windrush Compensation Scheme. The exemptions will have effect for payments made under the scheme on or after 3 April 2019, and deaths on or after that date for IHT purposes. The legislation will also introduce a new power to make regulations extending the definition of ‘qualifying compensation payment’ where appropriate for any necessary future compensation schemes.
The following is an overview of Finance Bill 2019/20 draft clauses, explanatory notes and tax information and impact notes published for consultation on 11 July 2019. The closing date for comments on the draft legislation is 5 September 2019.
Four items of legislation have immediate or retrospective effect. These concern:
Income tax
Rules for off-payroll working from April 2020
Finance Bill 2020 will extend the public sector reform of the IR35 rules to all engagements with large and medium-sized organisations. This shifts responsibility for operating the off-payroll working rules from the individual’s personal service company to the engaging organisation for contracts entered into, or payments made, on or after 6 April 2020.
HMRC has published its summary of consultation responses.
Taxable benefits and rules for measuring carbon dioxide emissions
Finance Bill 2020 will confirm that all new cars provided to employees and available for private use which are first registered from 6 April 2020 will be taxed according to the CO2 emissions figure measured under the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). Most appropriate percentages for calculating the car benefit charge will be reduced by 2% in 2020/21, then increased by 1% for each of the tax years 2021/22 and 2022/23, bringing the appropriate percentages back to their published rates in 2022/23.
Income Tax relief and the Enterprise Investment Scheme approved knowledge-intensive fund
Finance Bill 2020 will introduce an ‘approved knowledge-intensive fund’ from 6 April 2020 that:
HMRC has published new guidance alongside the draft legislation.
Income Tax and the treatment of expenses for voluntary office holders
Finance Bill 2020 will replace the existing concessionary treatment and create a statutory income tax exemption for payments or reimbursements of reasonable private expenses made to voluntary office holders from 6 April 2020. A Class 1 NICs disregard will be introduced through regulations after Royal Assent to Finance Bill 2020.
Changes to ancillary reliefs in Capital Gains Tax Private Residence Relief
Finance Bill 2020 will:
These changes will apply from 6 April 2020, apart from armed forces’ job-related accommodation, which will apply when the income tax exemption is brought into force by regulations.
HMRC has published a summary of consultation responses.
Corporate capital loss restriction for Corporation Tax
Finance Bill 2020 will introduce a restriction of 50% on the proportion of chargeable gains companies can relieve with carried-forward losses for accounting periods ending on or after 1 April 2020. The £5 million deductions allowance available against the corporate income loss restriction may be shared with companies’ chargeable gains. Gains from basic life assurance and general annuity business (BLAGAB), ring-fence oil-related activities and REITs are excluded from the restriction. Anti-forestalling provisions announced at Budget 2018 apply to any arrangements made on or after 29 October 2018.
HMRC has published a summary of consultation responses.
Capital Gains Tax relief on loans to traders
Finance Bill 2020 will widen the scope of the CGT relief in respect of loans made to traders, where these loans have become irrecoverable, to ensure the relief applies to borrowers located anywhere in the world and not just the UK. The change is made in consequence of a reasoned opinion issued by the European Commission that current UK law breaches the principle of free movement of capital. The change will have effect from 24 January 2019.
Deferral of Corporation Tax payments on EU group asset transfers
Finance Bill 2020 will allow UK companies, or those with a UK permanent establishment, to defer payment of corporation tax for up to five years on assets transferred to a member of the same group of companies resident in another EU or EEA state. The legislation is being introduced in response to the decision of the First-tier Tribunal in Gallaher Ltd [2019] UKFTT 207 (TC) that current UK law, which permits deferral for transfers between companies subject to UK corporation tax, places a restriction on the EU principle of freedom of establishment. The changes apply with immediate effect from 11 July 2019.
Income Tax and Corporation Tax rules for spreading transitional adjustments on new lease accounting
Finance Bill 2020 will ensure that the rules introduced by Finance Act 2019, Sch 14, requiring businesses who adopt the new IFRS 16 to spread the tax impact of any transitional lease accounting adjustment over the term of the lease, will apply to any period of account beginning on or after 1 January 2019 in which the new accounting standard is first adopted.
Share loss relief for Income Tax and Corporation Tax
Finance Bill 2020 will widen the scope of share loss relief to ensure it applies to qualifying investments in companies located anywhere in the world and not just the UK. An additional reporting requirement will be introduced for the claimant to notify HMRC of the tax residency of the company that issued the shares. The change is made in consequence of a reasoned opinion issued by the European Commission that current UK law breaches the principle of free movement of capital and will have effect from 24 January 2019.
Introduction of the new Digital Services Tax
Finance Bill 2020 will introduce legislation for the new digital services tax (DST) with effect from 1 April 2020 at a rate of 2% on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The DST will apply to groups with annual worldwide revenues of more than £500m where more than £25m of these revenues are derived from UK users. An annual allowance means the first £25m of a group’s revenues derived from UK users will not be subject to DST. HMRC has also published a summary of consultation responses and draft guidance.
Transfer of unlisted securities to connected companies for Stamp Duty and Stamp Duty Reserve Tax
Finance Bill 2020 will extend the stamp duty and SDRT market value rule to the transfer of unlisted securities to connected companies, targeted at contrived arrangements where there is an issue of shares by way of consideration for the transfer. The legislation will also amend the rules on disqualifying arrangements to prevent a second stamp duty charge arising on most share-for-share exchanges as part of a partition demerger. These changes will have effect from Royal Assent.
HMRC has also published its summary of consultation responses.
Post duty point dilution for wine and made-wine
Finance Bill 2020 will introduce penalties and forfeiture provisions on wine producers who dilute wine or made-wine after the duty point by adding water (or any other substance), if that addition would, through an increase in volume, have resulted in a greater amount of duty being payable. These measures will take effect from 1 April 2020
Inheritance Tax and excluded property added to and transferred between trusts
Finance Bill 2020 will provide that where property is added to a settlement, the domicile of the settlor will be considered for the purposes of the excluded property rules at the time of the addition rather than at the time the settlement was first created. This will ensure that additions to trusts by UK domiciled or deemed domiciled individuals made when they were non-domiciled are within the scope of IHT. The legislation will also introduce additional excluded property tests. The change will have effect from Royal Assent.
Inheritance Tax treatment of Kindertransport Fund payments
Finance Bill 2020 will provide that Kindertransport survivors’ estates will not be subject to IHT in relation to payments received from the German govevernment’s Kindertransport Fund, whether payments are made to claimants before their death or later to spouses or children. This will apply in relation to deaths on and after 1 January 2019, when the scheme opened.
Rules to measure carbon dioxide emissions for Vehicle Excise Duty
Finance Bill 2020 will confirm that the CO2 emissions figure for vehicle excise duty is to be based on the Worldwide Harmonised Light Vehicle Testing Procedure (WLTP) for all new cars registered from 1 April 2020.
Medical courier charities exemption from Vehicle Excise Duty
Finance Bill 2020 will exempt purpose-built vehicles used by medical courier charities, commonly referred to as ‘blood bikes’, from vehicle excise duty with effect from 1 April 2020, provided the vehicles meet certain criteria.
Changes to protect tax in insolvency cases
Finance Bill 2020 will amend insolvency legislation with effect rom 6 April 2020 to make HMRC a secondary preferential creditor for the distribution of assets in the event of insolvency in respect of taxes collected and held by businesses on behalf of other taxpayers, including VAT, PAYE, employee NICs and construction industry scheme deductions. The rules will be unchanged for taxes owed by businesses themselves, with HMRC remaining an unsecured creditor for corporation tax and employer NICs.
HMRC has published its summary of consultation responses.
Tax abuse using company insolvencies
Finance Bill 2020 will provide for directors and other connected persons to be jointly and severally liable for amounts due to HMRC from companies in cases of ‘phoenixism’ involving insolvency or potential insolvency. The legislation sets out the conditions to be met for HMRC to issue a ‘joint liability notice’ to an individual. The measure will take effect from Royal Assent.
Technical and procedural amendments to the General Anti-Abuse Rule
Finance Bill 2020 will allow HMRC to issue new ‘protective GAAR notices’ to extend the permitted 12-month window for HMRC to gather information and consider whether to continue a GAAR challenge. Taxpayers will have the right to appeal a GAAR adjustment 12 months after the protective GAAR notice is issued. The measure will have effect from Royal Assent. HMRC has published a technical briefing note to explain the changes.
Windrush Compensation Scheme payments exemptions from Income Tax, Capital Gains Tax and Inheritance Tax
Finance Bill 2020 will introduce income tax, IHT and CGT exemptions for payments made under the Windrush Compensation Scheme. The exemptions will have effect for payments made under the scheme on or after 3 April 2019, and deaths on or after that date for IHT purposes. The legislation will also introduce a new power to make regulations extending the definition of ‘qualifying compensation payment’ where appropriate for any necessary future compensation schemes.
