UK publishes Autumn Finance Bill 2017

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1 11 September 2017 Global Tax Alert UK publishes Autumn Finance Bill 2017 EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: The UK Autumn Finance Bill contains a number of major business and personal taxation measures, including reforms to: Corporation tax interest relief Corporation tax loss relief Substantial shareholding exemption Taxation of non-domiciles It is also one of the most long-awaited Finance Bills in recent years. Having started as draft clauses last December (with the above reforms having been subject to consultation well before that), the contents were originally included in the Finance Bill 2017 published in March. Most of the Bill s measures were then withdrawn in late April following the announcement of the snap General Election in June, in order to enable essential provisions (and a few other measures) to be enacted prior to Parliament s dissolution at the end of April. The promise was that the remaining provisions would be re-introduced after the Election, but with the Conservatives failing to secure a majority government there was then some uncertainty as to how many of the provisions would survive, and whether the original April 2017 commencement dates for a number of provisions would remain.

2 2 Global Tax Alert The commencement dates of the provisions in the Bill, published on 8 September 2017, have more or less stayed the same as they were in March. Some legislative changes were announced in July when revised draft clauses were published, 2 and some further changes were seen in the provisions published on 8 September. However, the thrust of the main provisions, particularly those highlighted above, seems to have remained broadly the same. Changes to commencement dates include Making Tax Digital, where following concerns over the original proposals, the Government announced in July a new delayed timetable for implementation, such that businesses with a turnover above the valued added tax (VAT) threshold will only now be required to keep digital records for VAT purposes from April 2019 at the earliest, and for other taxes from a date to be appointed (but expected to be no sooner than 2020). Also, the extension of the disclosure regime for VAT and other indirect taxes has been put back to 1 January Having had its publication delayed until after Parliament returned from its summer recess on 5 September, there is little time for the Bill to be enacted. The second reading of the Bill will take place on 12 September, and Parliament will then rise for its annual party conference recess between 14 September and 9 October, with a further November recess between 7 and 13 November. If the Bill is to be enacted before the Chancellor s first Autumn Budget (which is expected to take place sometime after 13 November) then the Bill will have to have completed its passage through the House of Commons by the end of October, in order to give sufficient time for it to pass through the Lords and receive before 7 November. This would give the Bill approximately four weeks of parliamentary scrutiny time, which is around half the time normally set aside to analyze its provisions. Nevertheless, assuming this is indeed the legislative timetable, this would mean that the Bill would complete its Report Stage in the House of Commons, and so become substantively enacted for accounting purposes, by around the end of October. Accordingly, companies reporting under UK Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards after that date would have to take into account the provisions of the Bill. Companies reporting under US GAAP would take account of the provisions on enactment, expected in November. The provisions, together with their planned commencement dates, have been summarized in the table below. Endnotes 1. Formally, Finance Bill See EY Global Tax Alert, UK Government announces plans to introduce Finance (No.2) Bill 2017, dated 17 July 2017.

3 Global Tax Alert 3 Provision Tax rates Commencement date Dividend nil rate for tax year April 2018 Income tax Money purchase allowance reduction to 4,000 if already accessed pension benefits 6 April 2017 Trading and property income allowances of 1,000 6 April 2017 Life insurance policies - just and reasonable recalculation of disproportionate gains Personal portfolio bonds extension of permitted investments EIS and SEIS changes 5 December 2016 VCT amendments 6 April 2017 Social investment tax relief 6 April 2017 Business investment relief extension of scope 6 April 2017 New valuation rules for benefits received from trustees for loans, moveable property and land Domicile 6 April 2017 Deemed domicile income and capital gains tax 6 April 2017 Deemed domicile inheritance tax 6 April 2017 Inheritance tax on UK residential property 6 April 2017 Corporation tax Loss relief rules 1 April 2017 (13 July in certain cases) Corporate interest restriction 1 April 2017 Substantial shareholding exemption reform 1 April 2017 Patent Box: cost-sharing arrangements 1 April 2017 Hybrids and other mismatches Northern Ireland trading profits - expansion of definition of Northern Ireland company Museums and galleries relief 1 April 2017 Tax relief for contributions to grassroots sport 1 April January 2017 (13 July for foreign tax definition amendments) From commencement of NI tax rate Petroleum Revenue Tax oil fields election 23 November 2016 First year allowances for electric charging points 23 November 2016 (ends 2019) Simplified capital allowances for investors in co-ownership authorised contractual schemes 1 April 2017

4 4 Global Tax Alert Chargeable gains Carried interest gains 8 July 2015 Elections on assets appropriated to trading stock 8 March 2017 Employment Taxes Disguised remuneration: Employment income through third parties 6 April 2017 Disguised remuneration: Trading income through third parties 6 April 2017 Disguised remuneration: Restriction of income tax relief 6 April 2017 Disguised remuneration: Restriction of corporation tax relief 1 April 2017 Disguised remuneration: Relevant tax payments relief 21 July 2017 Termination payments amendments 6 April 2018 Time limit for making good on taxable benefits not accounted for in real-time through PAYE 6 April 2017 Company car tax percentage for ultra-low emission vehicles 6 April 2020 Automated PAYE arrangements 6 April 2018 Exemption for pensions advice of 500 or less 6 April 2017 Deduction for employee legal expenses 6 April 2017 Trading and property business income Calculation of profits cash basis 6 April 2017 Trading in/developing UK land - taxing all profits arising on/after 8 March March 2017

5 Global Tax Alert 5 Indirect Taxes Air Passenger Duty rates 1 April 2018 Increased Gaming duty bands 1 April 2017 Remote gaming duty free plays made chargeable 1 August 2017 Licensing scheme for owners and lessees of tobacco products manufacturing machinery Fulfilment House Due Diligence Scheme for certain fulfilment houses/online marketplaces Landfill tax: taxable disposal definitions Effective by regulation but 2018 expected Effective by regulation but 2018 expected Removed from Bill Administration Digital reporting for income tax Digital reporting for VAT Partial closure notices Penalties for enablers of defeated tax avoidance Effective by regulation but April 2020 expected 1 April 2019 at earliest Disclosure of tax avoidance schemes: VAT/other indirect taxes 1 January 2018 Requirement to correct offshore tax non-compliance 6 April 2017 Penalties for VAT fraud Data gathering from money services businesses Errors in taxpayers documents 6 April 2017 Customs enforcement powers extension Removed from Bill

6 6 Global Tax Alert For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (United Kingdom), London Chris Sanger Claire Hooper Ernst & Young LLP, UK Tax Desk, New York James A. Taylor

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