Policy paper

Overview of tax legislation and rates 2016 - summary paragraphs

Updated 1 April 2016

Introduction

This document sets out the detail of each tax policy measure announced at Budget 2016. It is intended for tax practitioners and others with an interest in tax policy changes, especially those who will be involved in consultations both on the policy and on draft legislation. The information is set out as follows:

Section 1 provides detail on all tax measures to be legislated in Finance Bill 2016. This includes confirmation of previously announced policy changes and explains where changes, if any, have been made following consultation on the draft legislation. It also sets out new measures announced at Budget 2016 where they will be in Finance Bill 2016.

Section 2 provides details of proposed tax changes announced at Budget 2016 (or earlier) which will be legislated in a future Finance Bill, programme bills or which will be legislated in secondary legislation.

All Tax Information and Impact Notes published at Budget 2016 can be viewed.

Annex B provides tables of tax rates and allowances.

Finance Bill 2016 will be published on 24 March 2016.

1. Finance Bill 2016

This section summarises tax changes legislated in Finance Bill 2016 or in other legislation coming into effect for 2016 to 2017.

Most of the legislation in Finance Bill 2016 was exposed in draft for consultation on 9 December 2015 following announcement at Spending Review and Autumn Statement 2015. The paragraphs in this section indicate where changes have been made following consultation. Where clauses are unchanged, or only subject to minor technical amendments they are listed at the end of this section.

Income Tax

1.1 Income Tax Personal Allowance and Basic Rate Limit from 2017

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to increase the income tax personal allowance to £11,500 in 2017 to 2018. The basic rate limit will also increase to £33,500 in 2017 to 2018.

Taken together, these changes will increase the higher rate threshold, above which individuals pay income tax at 40%, to £45,000 in 2017 to 2018.

A tax information and impact note for this measure is published on this page.

1.2 Personal Tax - Personal Savings Allowance

As announced at March Budget 2015, legislation will be introduced in Finance Bill 2016 to provide for a new tax-free Personal Savings Allowance (PSA) for individuals. This will apply a 0% rate for up to £1,000 of savings income, such as interest, paid to an individual (or £500 for individuals with any higher rate income). The PSA will not be available to individuals with any additional rate income. Alongside the introduction of the PSA, banks, building societies and National Savings and Investments (NS&I) will cease to deduct tax from the account interest they pay to customers. These changes will have effect in relation to savings income paid or credited on or after 6 April 2016.

The draft clause published on 9 December 2015 has been updated following consultation to clarify:

• the definition of additional rate income for the purpose of the PSA
• the interaction of the PSA and the starting rate for savings,
• the interaction between savings income and the rules for calculating a reduction in the residuary income of an estate

1.3 Applying ‘English Votes for English Laws’ to Income Tax

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to enable the ‘English Votes for English Laws’ procedure to apply to the UK main rates of income tax. The UK-wide savings rates of income tax will be renamed as ‘savings basic’, ‘savings additional’ and, ‘savings higher’. The main rates of income tax will then apply to the non-savings, non-dividend income of any individual taxpayer that is resident in the UK and is not subject to the Scottish Rate of Income Tax. A default rate of income tax will apply to the non-savings, non-dividend income of taxpayers who are not subject to either the UK main rates of Income Tax or the Scottish Rate of Income Tax. These include trustees, non-UK resident companies and non-UK resident individuals.

A tax information and impact note for this measure is published on this page.

1.4 Northern Ireland top-ups

As announced at Budget 2016, the government will legislate at a later stage of Finance Bill 2016 to exempt from income tax the payments intended to top-up non-taxable welfare benefits that the Northern Ireland Executive intends to fund from within its block grant.

Employment and benefits in kind

1.5 Car benefit, appropriate percentage for 2019 to 2020

As announced at Budget 2015, legislation will be introduced in Finance Bill 2016 to increase the appropriate percentage of list price subject to tax by 3 percentage points for cars emitting more than 75 grams of carbon dioxide per kilometre (gCO2/km), to a maximum of 37%, in 2019 to 2020.

The 3 percentage point differential between the 0-50 and 51-75 gCO2/km bands and between the 51-75 and 76-96 gCO2/km bands will remain.

The legislation also modifies the appropriate percentage for cars which have no registered CO2 emissions figure. The appropriate percentage will be increased by two percentage point for each band, these changes apply to 2017 to 2018 and 2018 to 2019.

A tax information and impact note for this measure is published on this page.

1.6 Van Benefit Charge (the VBC)

As announced at Budget 2016, from 6 April 2017 the main VBC will increase by Retail Price Index (RPI). The increase will be based on the September 2016 RPI figure and will be introduced by secondary legislation later in 2016, in time for the tax code exercise in January 2017. The government will extend the VBC support for zero emission vans so that from 6 April 2016 the charge will be 20% of the main rate in 2016 to 2017 and 2017 to 2018, and will then increase on a tapered basis to 5 April 2022. The government will review VBC for zero emission vans again at Budget 2018 together with Enhanced Capital Allowances for zero emission vans.

1.7 Preventing liability to charge being removed from certain taxable benefits in kind

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to ensure that if there is a specific statutory provision for calculating the tax charge on a benefit-in-kind, this must be used. This will mean that where an employee gets something from their employer on the same terms as a member of the public, there will still be a taxable benefit based on the statutory provisions for calculating the charge.

A tax information and impact note for this measure is published on this page.

1.8 Sporting testimonials

As announced at Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to confirm that income from sporting testimonials and benefit matches for employed sportspersons, irrespective of whether they are arranged by the sportsperson’s employer or by an independent testimonial committee, is chargeable to income tax. This legislation will apply to testimonials which are non-contractual or non-customary and where the testimonial has been granted or awarded on or after 25 November 2015 for income from events taking place on or after 6 April 2017. Testimonials granted or awarded under contract or custom are already subject to income tax and will not be affected by the new legislation.

A tax information and impact note for this measure is published on this page.

Following consultation on the draft legislation, the exemption previously announced of £50,000 has been increased to £100,000. This applies from 6 April 2017 to an employed sportsperson against income from sporting testimonials which are non-contractual or non-customary. This will apply only to a single testimonial (which may consist of one or more events in a testimonial year). Separate Corporation Tax provisions to take such testimonial income out of charge if appropriate will also be introduced in Finance Bill 2016. Further legislation will also be introduced before 6 April 2017 to confirm the National Insurance treatment of income subject to the new legislation and to make some further consequential amendments.

1.9 Extending the real time collection of tax on benefits in kind: voluntary payrolling

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to allow for the payrolling of non-cash vouchers and credit tokens. A statutory framework has been introduced to allow payrolling of certain benefits in kind from 6 April 2016. This change will extend the statutory framework for payrolling benefits in kind to include non-cash vouchers and credit tokens. The regulations will be published in the summer and will come into effect from 6 April 2017.

A tax information and impact note for this measure is published on this page.

1.10 Employee share schemes: simplification of the rules

As announced at the Spending Review and Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to simplify tax-advantaged and non tax-advantaged employee share scheme rules. The changes will:

• For non-tax-advantaged schemes, clarify the tax treatment for internationally mobile employees of certain employment-related securities (ERS) and ERS options; this will come into force on 6 April 2016. Any charge to tax will arise under the rules that deal with ERS options, rather than earnings.
• Reinstate rules for Share Incentive Plans (SIPs) previously repealed, to enforce the principle that shares with preferential rights cannot be issued to selected employees only. This will have effect from the date that the Finance Bill 2016 receives Royal Assent.
• Permit late notification of tax-advantaged share schemes where the taxpayer had a reasonable excuse. This will have effect in relation to notifications made on or after 6 April 2016.

Following technical consultation on the draft legislation, Finance Bill 2016 will also revise capital gains tax legislation so that a rights issue that takes place on or after 6 April 2016, in respect of shares received on exercise of an Enterprise Management Incentive option, will be treated in the same way for share identification purposes as other rights issues.

A tax information and impact note for this measure is published on this page.

1.11 Employment Intermediaries and tax relief for travel and subsistence

As announced at the March Budget 2015 and following publication of draft legislation on 9 December 2015, the government will introduce legislation in Finance Bill 2016 to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary.

Following the publication of the draft legislation, amendments have been made to allow grouped companies to second workers within the group, and to prevent the organised misuse of Personal Service Companies in order to avoid the restrictions. Minor amendments have also been made to improve clarity and correct errors.

1.12 Tackling disguised remuneration

As announced at Budget 2016, the government will bring forward a package of changes to ensure that those who have used disguised remuneration tax avoidance schemes pay their fair share of tax and National Insurance contributions. These schemes often involve individuals being paid in loans through structures such as offshore Employee Benefit Trusts.

The changes will tackle disguised remuneration schemes used in the past as well as their continued use. Part of the package will be legislated in Finance Bill 2016, including closing down one type of scheme from Budget day (16 March 2016), with the remainder to follow in a Finance Bill 2017 following a technical consultation. This will include a new charge on loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5 April 2019.

The draft legislation, explanatory note and tax information and impact note for the part of the package that will be introduced in Finance Bill 2016 have been published today. An overview of the changes and technical note also published today gives additional details about all parts of the package.

A tax information and impact note for this measure is published on this page.

Pensions tax

1.13 Bridging pensions changes

Following the introduction of a single tier pension from 6 April 2016, legislation will be introduced in Finance Bill 2016 to allow the pension tax rules on bridging pensions to be aligned with Department for Work and Pensions legislation.

1.14 Serious Ill Health Lump Sums - under 75

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to enable a serious-ill health lump sum to be paid out of remaining funds once pension savings have been accessed. The changes will take effect from the day after Royal Assent to Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

1.15 Serious Ill Health Lump Sum - 75 and over

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to replace the 45% tax charge on serious ill-health lump sums paid to individuals who have reached age 75, with tax at the individual’s marginal rate. The changes will take effect from the day after Royal Assent to Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

1.16 Dependant’s Flexi-Access Drawdown

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to enable dependants with drawdown or flexi-access drawdown pension who would currently have to take one lump sum before age 23 to continue to access their funds as they wish. The changes will take effect from the day after Royal Assent to Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

1.17 Charity Lump Sum Death Benefits

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to align the tax treatment of charity lump sum death benefits whether they are paid out of drawdown and flexi-access drawdown funds or uncrystallised funds. The changes will take effect from the day after Royal Assent to Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

1.18 Trivial Commutation of Defined Contribution pensions in payment

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to enable money purchase scheme pensions in payment to be paid as a trivial commutation lump sum. The changes will take effect from the day after Royal Assent to Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

1.19 Top ups to Dependants’ Death Benefits

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to enable the full amount of dependants’ benefits to be paid as authorised payments where there are insufficient funds in a cash balance arrangement when the member dies. The changes will take effect from the day after Royal Assent to Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

Trading income

1.20 Extending Enhanced Capital Allowances (ECAs) for Enterprise Zones (EZs)

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to change the period in which 100 per cent ECAs are available in EZs to eight years from the date that they are announced.

ECAs are available to companies investing in qualifying plant and machinery on designated sites within EZs. These changes will have effect from Royal Assent.

A tax information and impact note for this measure is published on this page.

1.21 Repeal of renewals allowance

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to repeal the renewals allowance, with effect from 6 April 2016 for income tax purposes and from 1 April for corporation tax purposes. These dates align with the introduction of replacement furniture relief for residential landlords, ensuring alternative relief for this type of expenditure is available. The measure will ensure that tax relief for expenditure incurred by a business on replacement and alteration of tools is obtained under the same rules as apply to other equipment.

A tax information and impact note for this measure is published on this page.

1.22 Amendments to finance cost restriction for landlords

As announced at Summer Budget 2015 and legislated for in Finance (No. 2) Act 2015, relief for finance costs on residential properties will be restricted to the basic rate of income tax, gradually introduced from 6th April 2017. Finance bill 2016 amends the landlords finance cost restriction legislation to clarify that beneficiaries of deceased persons’ estates are entitled to the basic rate tax reduction and to ensure that the basic rate tax reduction is applied and calculated as intended.

A tax information and impact note for this measure is published on this page.

1.23 Reform of Wear and Tear Allowance

As announced at Summer Budget 2015, legislation will be introduced in Finance Bill 2016 to repeal the Wear and Tear allowance and make new provision for a deduction for expenditure on the replacement of domestic items such as furniture, furnishings, appliances (including white goods) and kitchenware in a let dwelling-house. The deduction will be for expenditure incurred on or after 1 April 2016 for corporation tax payers and 6 April 2016 for income tax payers on an item that is substantially the same as the item being replaced, plus any costs incurred in disposing of, or less any proceeds received for, the item being replaced.

Following technical consultation on the draft clauses, the legislation now accommodates part-exchanges and letting arrangements without a formal lease and clarifies that the item being replaced should no longer be available for use in the dwelling-house.

1.24 Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT)

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to ensure the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) legislation works as intended. The changes to the rules determining the five year period for the average turnover amount and the relevant three preceding years for the operating costs conditions will take effect for shares issued under the EIS, and investments made by VCTs, on or after 18 November 2015. This will ensure that the most recently filed accounts of a company are generally used to determine the end date of the relevant period. However an investee company may elect for the current law to apply for investments received up to and including 5 April 2016, in which case the measure will take effect for investments made on or after 6 April 2016. A new condition will be introduced to clarify the non-qualifying investments a VCT may make for liquidity management purposes, and will take effect for investments made by VCTs on or after 6 April 2016.

A tax information and impact note for this measure is published on this page.

1.25 Company distributions

As announced at the Spending Review and Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to amend the Transactions in Securities rules and introduce a Targeted Anti-Avoidance Rule in order to prevent opportunities for income to be converted to capital in order to gain a tax advantage.

The government will shortly publish its response to the consultation concerning company distributions, which was published on 9 December 2015.

1.26 Asset Managers Performance Linked Rewards

As announced at Budget 2016 and following technical consultation on draft clauses published on 9 December 2015, legislation will be introduced in Finance Bill 2016 to confirm the circumstances in which performance-related rewards paid to asset managers may be charged to capital gains tax rather than being charged to tax as income. The change will apply in relation to sums arising to managers on or after 6 April 2016.

Under this legislation, eligibility for capital gains tax treatment will be determined by the length of time for which the underlying scheme holds its investments on average. Full capital gains tax treatment will apply where the average hold period is 40 months or more (rather than 48 months specified in the draft legislation published on 9 December 2015). Additional bespoke calculation rules will also be introduced for additional asset classes, including venture capital and real estate, alongside a number of other minor technical changes.

1.27 Offshore Avoidance - Taxation of immovable property in the UK

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to ensure that all profits from dealing in and developing UK land are taxed fully in the UK, whether or not the business is resident in the UK and regardless of whether there is a UK permanent establishment. A technical note is published on GOV.UK. The legislation will be introduced at Report Stage, and take effect from the date it is introduced. Anti-avoidance rules have immediate effect to prevent arrangements to circumvent the rules: for example, by advancing profits to periods before the new legislation takes effect, or by arrangements designed to take advantage of tax treaties to avoid tax. Protocols have been agreed with Guernsey, the Isle of Man and Jersey, amending their treaties with the UK to support the introduction of this legislation. These will have effect from 16 March 2016.

Corporation Tax

1.28 Corporation Tax - changes to rates

As announced at Budget 2016, the Corporation Tax (CT) main rate will be reduced by an additional 1% for the Financial Year beginning 1 April 2020. Legislation in Finance Bill 2016 will set the rate at 17%, replacing the rate set for Financial Year 2020 in the Finance (No. 2) Act 2015.

A tax information and impact note for this measure is published on this page.

1.29 Anti-hybrids rules

Legislation will be included in Finance Bill 2016 in response to the OECD Report on hybrid mismatches and to deal with tax mismatches involving permanent establishments. This follows a consultation announced at Autumn Statement 2014. A summary of responses to the consultation was published on 9 December 2015. The legislation tackles aggressive tax planning, typically involving multinational groups, where either one party gets a tax deduction for a payment while the other party does not pay tax on the receipt, or where there is more than one deduction for the same expense. The legislation will have effect from 1 January 2017.

A tax information and impact note for this measure is published on this page.

1.30 Royalty withholding tax

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to widen the circumstances in which withholding tax must be deducted from payments of royalties to persons not resident in the UK and to counter the use of contrived arrangements involving double taxation treaties to obtain relief from withholding taxes on royalties. The changes preventing the use of contrived arrangements have effect for payments made on or after 17 March 2016. The changes to widen the circumstances in which withholding tax must be deducted from payments of royalties will be introduced later in the passage of Finance Bill 2016 and will have effect for payments made on or after the date of Royal Assent to the Finance Bill 2016.

A tax information and impact note for this measure is published on this page.

1.31 Patent Box

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to amend the Patent Box rules (Part 8A of CTA 2010) to ensure they comply with the new international framework for tax favoured Intellectual Property (IP) regimes set out by the OECD in October 2015, and in particular that profits qualifying for a reduced rate of corporation tax are determined by reference to the company’s direct engagement in R&D. The changes generally have effect from 1 July 2016.

1.32 Expiration of Vaccine Research Relief

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to permit the expiry of the vaccine research relief with effect from 1 April 2017.

A tax information and impact note for this measure is published on this page.

1.33 Research and development state aid cap

Legislation will be introduced in Finance Bill 2016 to amend the calculation of the State aid cap in sections 1114 and 1118 Corporation Tax Act 2009. This calculation allows a company to work out whether or not they are under the State aid cap for research and development (R&D) SME relief, and it includes a figure for notional relief within the large company relief scheme. Since that scheme is being replaced by the R&D Expenditure Credit on 1 April 2016 an amendment is needed so that the calculation continues to apply in the same way as it did under the previous scheme.

A tax information and impact note for this measure is published on this page.

1.34 Loans to participators and other arrangements: rate of tax

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to specifically link the rate of tax chargeable on loans or advances to, or arrangements conferring benefits on, participators made by close companies to the higher dividend rate. The rate will be increased from 25% to 32.5%. The new rate will apply to loans made or benefits conferred on or after 6 April 2016.

A tax information and impact note for this measure is published on this page.

1.35 Banking Companies: excluded entities

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to amendthe definition of an investment bank to ensure it is delivering its intended policy objective.

A tax information and impact note for this measure is published on this page.

1.36 Bank loss relief restriction: amendment to restriction

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to amend the rules restricting loss relief for banks announced at Autumn Statement 2014 and legislated in Finance Act 2015. The proportion of a banking company’s annual taxable profit that can be offset by carried-forward losses will be restricted to 25%. The new rules will apply with effect from 1 April 2016.

A tax information and impact note for this measure is published on this page.

1.37 Oil and gas: Reducing the supplementary charge

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to reduce the rate of supplementary charge from 20% to 10%. The reduction will take effect for accounting periods starting on or after 1 January 2016. A tax information and impact note for this measure is published on this page.

1.38 Oil and gas: Extension of ‘relevant income’ for the cluster area and investment allowances

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to give HMRC a power to extend the definition of ‘relevant income’ for the cluster area and investment allowances by secondary legislation. The government intends to allow tariff income to activate the allowance. A tax information and impact note for this measure is published on this page.

1.39 Minor amendments to the anti avoidance provisions in the onshore, cluster area and investment allowances

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to amend the onshore, cluster area, and investment allowances to update the conditions which disqualify expenditure, incurred on the acquisition of an asset in certain circumstances, from generating allowance. A tax information and impact note for this measure is published on this page.

1.40 Zero-rating Petroleum Revenue Tax

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to reduce the rate of Petroleum Revenue Tax from 35% to 0%. This permanent reduction will have effect in respect of chargeable periods ending after 31 December 2015 and will replace the 35% rate announced at Budget 2015. A tax information and impact note for this measure is published on this page.

1.41 Securitisation and annual payments

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to amend the regulation making power which concerns the corporation tax treatment of securitisation companies. The revised power to make regulations will be extended so that it also applies to the Income Tax Acts and will have effect on and after the date of Royal Assent.

A tax information and impact note for this measure is published on this page.

1.42 Corporation tax rules for life insurance companies

Legislation will be introduced in Finance Bill 2016 to amend the taxation of life insurance companies to ensure the regime works as intended in relation to the treatment of intangible fixed assets debits, deemed income and trading losses in certain specific circumstances.

1.43 Tax treatment for Insurance Linked Securities

As announced at Budget 2016, legislation will be included in Finance Bill 2016 to enable regulations to provide for a bespoke corporate tax regime for insurance linked securities.

This follows announcement at March Budget 2015, since when the government has been working with the insurance industry to develop a new corporate and tax structure for allowing vehicles issuing Insurance Linked Securities to be domiciled in the UK. The power to make regulations will have effect from Royal Assent. Consultation on the design features of the regime is underway and further detailed consultation on the content of regulations will take place in summer 2016. The regulations will be laid by the end of 2016.

A tax information and impact note for this measure is published on this page.

1.44 Trading Income Received in Non-Monetary form

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to confirm that trading income received in non-monetary form is fully brought into account in calculating taxable profits for income tax and corporation tax purposes. This measure will also apply to the calculation of taxable property income.

A tax information and impact note for this measure is published on this page.

1.45 Updating transfer pricing guidelines

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to update the definition of “transfer pricing guidelines” in section 164(4) Taxation (International and Other Provisions) Act 2010 and section 357GE(1) Corporation Tax Act 2010. This will maintain the link between the UK’s transfer pricing legislation and the internationally agreed consensus on the practical application of transfer pricing principles.

A tax information and impact note for this measure is published on this page.

Capital Gains Tax

1.46 Capital Gains Tax: Changes to rates

Legislation will be introduced in Finance Bill 2016 to reduce the rate of CGT charged on most gains accruing to basic rate taxpayers from 18% to 10%. For higher rate taxpayers, or those whose gains exceed the unused part of their basic rate tax band, the rate of CGT charged on most gains will be reduced from 28% to 20%.

The 28% and 18% rates will continue to apply for gains accruing on the disposal of interests in residential properties that do not qualify for Private Residence Relief, and the receipt of carried interest. The rate of CGT charged on Annual Tax on Enveloped Dwellings related chargeable gains will continue to be 28%. These changes will have effect from 6 April 2016.

A tax information and impact note for this measure is published on this page.

1.47 Capital Gains Tax – entrepreneurs’ relief and associated disposals

Legislation will be introduced in Finance Bill 2016 to allow claims to entrepreneurs’ relief in certain cases where relief ceased to be due as a result of changes in Finance Act 2015. In particular, relief will be due, subject to conditions, on an ‘associated disposal’ of a privately-held asset when the accompanying disposal of business assets is to a family member. Relief can also be claimed in some cases where the disposal of business assets does not meet the present 5% minimum size condition. These changes have effect for disposals on or after 18 March 2015.

A tax information and impact note for this measure is published on this page.

1.48 Capital Gains Tax – entrepreneurs’ relief and disposals of goodwill

Legislation will be introduced in Finance Bill 2016 to allow claims to entrepreneurs’ relief in certain cases where relief ceased to be due as a result of changes in Finance Act 2015. In particular, relief will be due, subject to conditions, on gains on the goodwill of a business when that business is transferred to a company controlled by five or fewer persons or by its directors. These changes have effect for disposals on or after 3 December 2014.

A tax information and impact note for this measure is published on this page.

1.49 Capital Gains Tax – entrepreneurs’ relief: definition of a trading company etc

Legislation will be introduced in Finance Bill 2016 to allow claims to entrepreneurs’ relief in certain cases where relief ceased to be due as a result of changes in Finance Act 2015. The definitions of a trading company and trading group which apply for entrepreneurs’ relief purposes will be amended. This will allow a percentage of the activities of a joint venture company to be treated as carried on by a company which holds shares in that company. Where the new definitions apply, trading activities of a company in its capacity as a partner in a firm may be taken into account as such rather than treated as being non-trading. These changes have effect for disposals on or after 18 March 2015.

A tax information and impact note for this measure is published on this page.

1.50 Capital Gains Tax – entrepreneurs’ relief: extension to long-term external investors

Legislation will be introduced in Finance Bill 2016 applying a 10% rate of Capital Gains Tax (CGT) to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals that were acquired for new consideration. The qualifying gains will be subject to a separate lifetime limit of £10 million. This legislation will apply to qualifying shares bought on or after 17 March 2016, and held for a period of at least three years starting from 6 April 2016.

A tax information and impact note for this measure is published on this page.

1.51 Capital Gains Tax for non-UK residents disposing of UK residential property

As announced at the Spending Review and Autumn Statement 2015, the government will amend the CGT computations required by non-residents on the disposal of UK residential property by removing with effect from 6 April 2015 a double charge that occurs in some circumstances and correcting an omission with effect from 25 November 2015. The government will also add CGT to the list of taxes that the government may collect on a provisional basis. Following consultation on the draft legislation, published on 9 December 2015, the government will also prescribe with effect from 6 April 2015 two specific circumstances where a return is not required and give HM Treasury, rather than HMRC, powers to add, amend or remove circumstances and make consequential provision.

1.52 Changes to Employee Shareholder Status

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to place a lifetime limit of £100,000 on the gains that a person with Employee Shareholder Status can make on the disposal of Employee Shares exempt from Capital Gains Tax. The change will take effect in relation to Employee Shareholder shares acquired in consideration of an Employee Shareholder agreement entered into from midnight at the end of 16 March 2016, and to gains on such shares.

A tax information and impact note for this measure is published on this page.

Inheritance Tax

1.53 Inheritance Tax: Downsizing and the residence nil-rate band

As announced at Summer Budget 2015, legislation will be introduced in Finance Bill 2016 to ensure that the residence nil-rate band will be available in cases where a person downsizes or ceases to own a home and other assets are passed on death to direct descendants. Following consultation, the draft legislation will be revised to clarify when a disposal has occurred, to ensure that certain disposals made by trustees will also be taken into account, and to ensure that the provisions relating to cases involving conditionally exempt assets work as intended. These changes will apply for deaths on or after 6 April 2017 where the deceased downsized or disposed of a property on or after 8 July 2015.

1.54 Estates Duty and Inheritance Tax: Objects granted exemption from Estate Duty

As announced at Budget 2016 legislation will be introduced in Finance Bill 2016 to:

• revise the way Estate Duty and IHT interact so that where both charges could apply HMRC may elect which charge to raise in relation to chargeable events occurring on or after 16 March 2016;
• create, with effect from the date of Royal Assent, a charge on objects which are currently subject to an Estate Duty exemption and which have been lost;
• bring back within scope, with effect from the date of Royal Assent, certain galleries and museums who used to benefit from the favourable tax exemptions under Schedule 3 to Inheritance Tax Act (IHTA) 1984 on the grounds that they were maintained by a local authority but are currently unable to do so because of their status as independent charitable trusts.

A tax information and impact note for this measure is published on this page.

1.55 Inheritance Tax: exemption for compensation and ex-gratia payments to victims of persecution during World War II‎

As announced at Autumn Statement 2015, the government will legislate Extra Statutory Concession F20, which gives an inheritance tax exemption in respect of certain compensation and ex-gratia payments for World War II claims. The legislation will also extend the scope of the existing concession to include a payment made under a recently created compensation scheme known as the Child Survivor Fund. Following consultation, the legislation has amended to extend the power for the Treasury to add additional payments from particular schemes so that it includes prisoners of war and civil internees as well as victims of National Socialist persecution. The legislation will apply to deaths on or after 1 January 2015.

Apprenticeship Levy

1.56 Apprenticeship levy

Legislation will be introduced in Finance Bill 2016 for the apprenticeship levy on employers (first announced in the Summer Budget). The levy will be introduced in April 2017. Minor amendments have been made to the draft legislation published on 4th February 2016.

VAT

1.57 Changes to VAT representatives legislation and the introduction of joint and several liability on the online marketplaces

Legislation will be introduced in Finance Bill 2016 to:

• amend section 48 of the VAT Act 1994 to strengthen the existing rules that enable HMRC to direct overseas businesses selling goods in the UK to appoint a VAT representative with joint and several liability and/or provide security for the VAT that becomes due; and
• hold an online marketplace jointly and severally liable for the VAT that an overseas business selling goods via the online marketplace fails to account for.

A tax information and impact note for this measure is published on this page.

Stamp Duty Land Tax

1.58 Reform of charging provisions for Stamp Duty Land Tax (SDLT) on non-residential property

SDLT on purchases of non-residential property is being reformed with effect on or after 17 March 2016. SDLT will be payable at each rate on the portion of the purchase price which falls within each band, rather than at a single rate on the whole transaction value. The rates and thresholds for freehold and lease premium transactions, as well as leasehold rent transactions, are also being amended as part of this reform.

For freehold and lease premium transactions the portion of the transaction value up to £150,000 is charged at a rate of 0%, the portion of the transaction value between £150,001 and £250,000 is charged at a rate of 2% and the portion over £250,001 is charged at a rate of 5%. For leasehold rent transactions the portion of the net present value of the rent (NPV) up to £150,000 is charged at a rate of 0%, the portion of the NPV between £150,001 and £5,000,000 is charged at a rate of 1% and the portion of the NPV over £5,000,000 is charged at a rate of 2%.

A tax information and impact note for this measure is published on this page.

1.59 Higher rate of Stamp Duty Land tax (SDLT) on additional residential properties

As announced at the Spending Review and Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to apply higher rates of SDLT, 3 percentage points above the existing rates, for purchases of additional residential properties on or after 1 April 2016.

A tax information and impact note is published on this page.

1.60 Stamp Duty Land Tax (SDLT): application to certain authorised property funds

As announced at the Spending Review and Autumn Statement 2015, the government will introduce a seeding relief for Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs) and make changes to the SDLT treatment of CoACSs investing in property so that SDLT does not arise on the transactions in units. Some minor technical changes have been made since publication of the draft clause. This legislation will take effect from the date Finance Bill 2016 receives Royal Assent.

1.61 Annual Tax on Enveloped Dwellings and 15% rate of Stamp Duty Land Tax (SDLT): Widening the Scope of the Reliefs

As announced at the Spending Review and Autumn Statement 2015, the scope of the reliefs available from these charges will be extended where a residential property is held for the purposes of an Equity Release Scheme (Home Reversion Plan), occupied by certain employees, or acquired for demolition or conversion into non-residential use. Following consultation on the draft legislation some amendments have been made of a minor technical nature. These changes will come into effect from 1 April 2016.

1.62 Stamp duty and Stamp duty reserve Tax: Deep In The Money Options (DITMOs)

As announced at Spending Review and Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to stop avoidance of stamp duty and SDRT using ‘deep in the money’ options to transfer shares to a depositary receipt issuer or clearance service. Deep in the money call options have a strike price significantly below market value. Shares transferred to a depositary receipt issuer or clearance service as a result of the exercise of an option will now be charged the 1.5% higher rate of stamp duty or SDRT based on either their market value or the option strike price, whichever is higher.

Draft legislation was published for consultation in December 2015. The legislation has been revised so that the change will now have effect from 23 March 2016 and apply to options exercised on or after 23 March 2016 which were entered into on or after 25 November 2015. The effective date has been moved back to allow the appropriate resolutions for stamp duty and SDRT to take effect at the same time.

Indirect taxes

1.63 Insurance Premium Tax

Legislation will be introduced in Finance Bill 2016 to increase the standard rate of Insurance Premium Tax (IPT) to 10%. The change will take effect on 1 October 2016. The rate rise will help to pay for flood defences and resilience.

A tax information and impact note for this measure is published on this page.

1.64 Landfill tax rates

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to increase the standard and lower rates of Landfill Tax in line with RPI, rounded to the nearest 5 pence, from 1 April 2017 and again from 1 April 2018. A tax information and impact note for this measure is available at on this page and the rates of Landfill Tax are set out in Annex B. The annexes confirm the Budget 2015 announcement on the end of the transition period for the loss on ignition test for qualifying waste fines that are eligible for the lower rate.

1.65 Climate Change Levy (CCL) main rates

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to increase the main rates of CCL in 2017 to 2018, 2018 to 2019 and 2019 to 2020.

In line with usual practice, the rates will increase in line with the Retail Price Index (RPI) from 1 April 2017 and again on 1 April 2018.

The rates will again increase on 1 April 2019 to recover the tax revenues lost by closing the Carbon Reduction Commitment (CRC) energy efficiency scheme. The balance between rates on taxable commodities will be updated to reflect changes in the fuel mix used in electricity generation. In addition, the reduced rates of CCL for participants in the Climate Change Agreement scheme will be amended so participants will not pay more CCL than they would have done had the rates increased with RPI in 2019 to 2020. All these changes from 2019 to 2020 are part of a package of wider reform to business energy taxation following consultation during 2015. A response document to this consultation is being published at Budget 2016.

A tax information and impact note for this measure is available on this page and the main and reduced rates of CCL are set out in Annex B.

1.66 Air Passenger Duty (APD) - Rates for 2016 to 2017

As announced at March Budget 15, legislation will be introduced in Finance Bill 2016 to increase air passenger duty rates in line with RPI from 1 April 2016.

A tax information and impact note for this measure is published on this page.

1.67 Vehicle Excise Duty (VED) rates for cars, vans, motorcycles and motorcycle trade licences

Legislation will be introduced in Finance Bill 2016 to increase VED rates in line with the Retail Price Index (RPI) with effect from 1 April 2016. Details of the VED rate changes are published in Annex B.

A tax information and impact note for this measure is published on this page.

1.68 Vehicle Excise Duty (VED) 40-year rolling classic vehicle exemption

Legislation will be introduced in Finance Bill 2016 to extend the existing VED exemption for classic vehicles permanently so that on the 1 April each year vehicles constructed more than 40 years before the beginning of the year will automatically be exempt. This change will have effect from 1 April 2017.

A tax information and impact note for this measure is published on this page.

1.69 Heavy Goods Vehicle (HGV) VED and Road User Levy

The government will freeze rates of VED for HGVs in 2016 to 2017, which includes all rates linked to the basic goods rate. Levy rates will also be frozen in 2016 to 2017.

1.70 Gaming duty

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to raise the Gross Gaming Yield (GGY) bandings for gaming duty in line with inflation (based on RPI). The revised GGY bandings used to calculate gaming duty must be used for accounting periods starting on or after 1 April 2016. The GGY bandings are published in Annex B

A tax information and impact note for this measure is published on this page.

1.71 Fuel Duty

Fuel duty rates will remain frozen for 2016 to 2017.

1.72 Aqua methanol rates

As announced at Budget 2016, and following the previous announcement at Budget 2014, legislation will be introduced in Finance Bill 2016 to set a reduced road fuel duty rate for aqua methanol from 1 October 2016 of 7.90p per litre.

A tax information and impact note for this measure is published on this page.

1.73 Tobacco products duty rates

As announced at Budget 2016, the duty rates for all tobacco products will be increased by 2% above inflation, from 6pm on the 16 March 2016. This is in accordance with the Budget 2014 announcement that all tobacco duty rates will increase by this amount each year until the end of this Parliament.

Budget 2016 also announced that hand-rolling tobacco duty would rise by an additional 3% above this to 5% above retail price inflation. Legislation for this will be introduced in Finance Bill 2016 and the rates are set out in Annex B.

A tax information and impact note for this measure is published on this page.

1.74 Alcohol duty rates

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to increase the following alcohol duty rates in line with inflation (based on RPI):

• sparkling cider and perry exceeding 5.5% alcohol by volume (abv) but less than 8.5% abv
• all wine and made-wine rates at or below 22% abv

These changes will take effect from 21 March 2016.

The duty rates on beer, spirits, wine and made wine exceeding 22% abv, still cider and perry, and sparkling cider and perry of a strength not exceeding 5.5% abv have been frozen.

A tax information and impact note for this measure is published on this page. The rates are set out in Annex B.

Tax administration

1.75 State Aid Modernisation

As announced at Budget 2016, legislation will be introduced in Finance Bill 2016 to enable HMRC, from July 2016, to collate more information on beneficiaries of approved State aids. This will help the UK improve the monitoring of tax State aids and compliance with State aid guidelines.

A tax information and impact note for this measure is published on this page.

1.76 Large Business – requirement to publish tax strategies and special measures

As announced at Budget 2016, and following consultation on the draft clauses published on 9 December 2015, legislation will be introduced in the Finance Bill 2016 to:

• provide a requirement for large businesses to publish their tax strategy as it relates to or affects UK taxation
• a ‘special measures’ process narrowly targeted to tackle the small number of large businesses that persistently engage in aggressive tax planning and/or refuse to engage with HMRC in an open and collaborative way.

Following consultation, the draft legislation has been revised to clarify the population of those entities in scope of the legislation. The legislation will be effective for accounting periods commencing on or after Royal Assent to Finance Bill 2016.

1.77 Strengthening civil deterrents for offshore evasion

As announced at Budget 2016, and following publication of draft legislation on 9 December 2015, Finance Bill 2016 will include legislation to increase minimum penalties for deliberate offshore tax evasion, require greater levels of disclosure for penalty reductions, remove protection from naming for unprompted disclosures, and allow naming provisions to name individuals who look to hide their evasion behind companies and other entities. This introduces an additional penalty for serious cases of deliberate offshore evasion, which is equivalent to up to 10% of the underlying asset value. This will come into force from to Finance Bill 2016.

1.78 Simple Assessment

As announced at Spending Review and Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to provide a new power to allow HMRC to make an assessment of a person’s income tax or capital gains tax liability without them first being required to complete a self-assessment return and where it has sufficient information about that individual to make the assessment.

Following consultation on the draft legislation for Simple Assessment as published on 9 December 2015 we have increased the time limit for customers to dispute the amount due in their assessment to 60 days and have clarified the arrangements for interest and late payment penalties to bring these in line with interest and late payment penalties for Self Assessment.

This measure will have effect on and after the date of Royal Assent to Finance Bill 2016.

Measures unchanged following consultation

This section lists those measures for which legislation is included in Finance Bill 2016 where draft legislation was been published for consultation on 9 December 2015 and either no changes were made, or only minor technical amendments have been made to the final legislation to be introduced in Finance Bill 2016.

The list indicates which draft clause at 9 December 2015 the measure listed refers to.

Income Tax

• Retention of the Diesel Supplement (draft clause 7)
• Personal Tax - Trivial Benefits in kind (draft clause 8)
• Deductions at a fixed rate (draft clause 20)
• Bad debt relief on peer-to-peer lending (draft clause 5)
• Plant and machinery Leasing Anti-Avoidance (draft clauses 35 and 36)
• Self Assessment Time Limits (draft clause 72)
• Tax exemption for payments from the Netherlands’ government to victims of persecution 1940 to 1945 (draft clause 15)
• Exclusion of energy generation from the venture capital schemes (draft clause 6)
• Personal Tax - Personal Savings Allowance (draft clauses 1 and 4)
• Personal Tax - Extending tax advantages after death of an ISA account holder (draft clause 2)
• Business Tax - Farmers’ averaging period extended (draft clause 19)
• Dividend Tax (draft clauses 2 and 3)

Pensions

• Dependants’ scheme pensions (draft clause 14)
• Pensions - Lifetime allowance reduction (draft clause 12)

Capital Gains Tax

• Capital Gains Tax (CGT) for non-UK residents disposing of UK residential property (draft clauses 41 and 42)

Inheritance Tax

• Inheritance Tax (IHT) - Treatment of unused drawdown funds on death (draft clause 46)

Corporation tax

• Loan relationships and derivative contracts (draft clauses 23, 24, and 25)
• Corporation Tax - Orchestra tax relief (draft clauses 27 and 28)
• Corporation Tax – loans to participators (draft clause 26)

VAT

• VAT refunds to certain bodies (draft clause 47)
• VAT - Reliefs for Isle of Man Charities (draft clause 49)

Indirect tax

• Climate change levy removal of exemption for renewable source electricity: transition period (draft clause 59)

Tax administration

• Raw Tobacco Approval Scheme (draft clause 82)
• Criminal offence for offshore tax evaders (draft clause 70)
• Serial Avoiders (draft clauses 63 and 64)
• Extending HMRC’s data-gathering powers (draft clauses 79 and 80)
• Civil sanctions for enablers (draft clause 67)
• Corporation Tax - Intangible assets transferred for partnerships and related party rules (draft clauses 29 and 30)
• Anti-Avoidance - General Anti-Abuse Rule (GAAR) penalties (draft clauses 60, 61 and 62)
• Gift aid and intermediaries (draft clause 76)
• HMRC judgement debt interest rate (draft clauses 73, 73 and 75)
• Detention and seizure - amendment to the Customs and Excise Management Act 1979 (draft clause 77)
• Proceedings under the customs and excise management act 1979 – prosecuting authority (draft clause 78)
• Application to Scotland of HMRC’s set-off debt collection powers (draft clause 81)
• Legislation to put the Office of Tax Simplification on a statutory footing ((draft clauses 83, 83, 85, 86, 87 and 88)

2. Future tax changes

This section summarises tax changes announced at Budget 2016 where the changes will be legislated in a future Finance Bill or other future legislative vehicle.

Income tax

Domicile

2.1 Reform of domicile rules and Inheritance tax

The government is undertaking a major reform to non-domicile taxation. As announced at Summer Budget 2015, from April 2017 non-UK domiciled individuals (non-doms) will be deemed UK domiciled for all tax purposes after they have been UK resident for 15 out of the past 20 tax years. Additionally, individuals who were born in the UK and who have a UK domicile of origin will revert to their UK domiciled status for tax purposes while resident in the UK. The government will also legislate to charge inheritance tax on all UK residential property indirectly held through an offshore structure from 6 April 2017.

As set out at Summer Budget 2015, non-doms who have a non-UK resident trust set up before becoming deemed domiciled in the UK will not be taxed on income and gains retained in the trust. The government will legislate all non-dom reforms in Finance Bill 2017. Budget 2016 confirms that non-doms who become deemed-domiciled in April 2017 can treat the cost base of their non-UK based assets as being the market value of that asset on 6 April 2017. Individuals who expect to become deemed UK domicile under the 15 out of 20 year rule will be subject to transitional provisions with regards to offshore funds to provide certainty on how amounts remitted to the UK will be taxed.

Employment income taxation and benefits in kind

2.2 Fuel benefit charge (FBC)

As announced at Budget 2016, the FBC multipliers for both company cars and vans will be increased in line with RPI with effect from 6 April 2017. The changes will be introduced by secondary legislation later in 2016, in time for the usual tax code exercise in January 2017.

2.3 Alignment of dates for ‘making good’ payments

As announced at Budget 2016, the government will consult on proposals to align the dates by which an employee has to ‘make good’ the cost of their benefit-in-kind to reduce their tax liability. The aim of the proposals is to simplify and clarify the current range of dates for ‘making good’ payments.

‘Making good’ is where an employee makes a payment to their employer in return for a benefit-in-kind they receive.

The consultation will be published in the summer and will run for 12 weeks.

2.4 Salary Sacrifice for Provision of Benefits in Kind

As announced at Budget 2016, the government will consider limiting the range of benefits that attract income tax and National Insurance contributions (NICs) advantages when they are provided as part of salary sacrifice schemes. However, the government’s intention is that pension saving, childcare, and health-related benefits such as Cycle to Work should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements.

2.5 Travel and subsistence expenses rules

Following the consideration of travel and subsistence (T&S) rules by the Office of Tax Simplification (OTS), the government announced at Budget 2014 that it would conduct a review of the current tax rules for T&S.

The government published a discussion paper in September 2015 that outlined a proposed T&S framework for consideration. Responses received made clear that, although complex in parts, the current T&S rules are generally well understood and work effectively for the majority of employees. Revised guidance published in 2015 has improved understanding and application of the rules.

Therefore, as announced at Budget 2016, the government will not be taking forward the proposed framework for consultation and the broad T&S rules will remain as they are. The government will publish a summary of responses to the discussion paper shortly after Budget 2016.

The government will continue to look for simplifications and seek to improve employers’ reporting requirements for T&S.

2.6 Company Car Tax (CCT) Review

As announced at Budget 2016, from 2020 to 2021, the government will continue to base Company Car Tax on the carbon dioxide (CO2) emissions of cars and will consult on reform of the bands for Ultra-Low Emission Vehicles (below 75 grams of CO2 per kilometre).

2.7 Exemption for employer provided pensions advice

As announced at Budget 2016, legislation will be introduced by statutory instrument under the minor benefits provisions to introduce a new income tax exemption and a corresponding National Insurance disregard for financial advice on pensions for the first £500 of the cost of provision, where the advice is arranged by the employer. This will come into effect from 6 April 2017.

The existing tax relief for employer-provided pensions advice, which has been in force since 2004, will be repealed as the new tax relief extends to tax advice on pensions, and the existing provision will become otiose.

2.8 Pensions Advice Allowance

As announced at Budget 2016, the government will consult over summer 2016 on introducing a Pensions Advice Allowance. This will allow people to withdraw £500 tax free, before the age of 55, from their defined contribution pension to redeem against the cost of financial advice.

2.9 Off payroll working in the public sector: reform of the intermediaries legislation

As announced at Budget 2016, from April 2017 the government will make public sector bodies and agencies responsible for operating the tax rules that apply to off payroll working in the public sector. The rules will remain unchanged when individuals are working in the private sector. The government will consult on a clearer and simpler set of tests and online tools. Legislation will be included in Finance Bill 2017.

2.10 Termination payments

As announced at Budget 2016, the government will clarify and tighten the rules about the taxation of termination payments. This will include introducing legislation to clarify that all payments in lieu of notice and certain damages payments are taxable as earnings and removing foreign service relief. The government will also be aligning the employer NICs and tax treatments of termination payments, so employers will have to pay NICs on the elements of termination payments that exceed £30,000. These changes will be legislated in Finance Bill 2017 and a future NICs Bill and will take effect from April 2018. A technical consultation will be published over the summer.

2.11 Deduction of tax from savings income

As announced at Budget 2016, legislation will be introduced in Finance Bill 2017 to remove the requirement to deduct income tax at source from interest distributions from Open-Ended Investment Companies, authorised unit trusts and investment trust companies and from interest on peer to peer loans.  These changes will have effect from 6 April 2017. They will bring these types of savings income into line with the treatment of interest paid on bank and building society accounts following the introduction of the Personal Savings Allowance.

Trading income etc

2.12 Business Premises Renovation Allowance (BPRA)

As announced at Budget 2016, the Business Premises Renovation Allowance will expire in 2017 as legislated in Finance Act 2012. BPRA will end on 31 March 2017 for Corporation Tax and 5 April 2017 for Income Tax respectively. BPRA will not be extended after those dates.

2.13 Partnership taxation: proposals to clarify tax treatment

As announced at Budget 2016, the government will consult on proposals to clarify the taxation treatment of partnerships in particular circumstances.

Any necessary legislation will be announced in a future Finance Bill.

2.14 Property and Trading Income Allowances

The government announced at Budget 2016 the introduction of a £1000 allowance for property income and a £1000 allowance for trading income from the 2017 to 2018 tax year. The new allowances will mean that individuals with property income below £1000 or trading income below £1000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance from their gross income. Legislation will be introduced in Finance Bill 2017.

2.15 Lifetime Individual Savings Account

As announced at Budget 2016, legislation will be introduced to provide a Lifetime Individual Savings Account (Lifetime ISA). The Lifetime ISA will be available from April 2017 for adults under the age of 40. They will be able to contribute up to £4,000 per year, and receive a 25% bonus from the government. Funds from the Lifetime ISA , including the government bonus, can be used to buy a first home at any time from 12 months after the account opening, and be withdrawn from age 60.

The government will discuss the implementation of the Lifetime ISA with the savings and investment industry ahead of April 2017.

The government also announced that the annual ISA subscription limit will be increased to £20,000 from 6 April 2017. This applies to all savers.

Capital allowances

2.16 Capital allowances: business cars first-year allowance (FYA)

The government will extend the 100% FYA for businesses purchasing low emission cars for a further three years to April 2021. From April 2018 the carbon dioxide emission threshold below which cars are eligible for the FYA will also be reduced from 75 grams/kilometre to 50 grams/kilometre.

From April 2018, the government will reduce the carbon dioxide emission threshold for the main rate of capital allowances for business cars from 130 grams/kilometre to 110 grams/kilometre.

The government will review the case for the FYA and the appropriate emission thresholds from 2021 at Budget 2019.

A tax information and impact note will be published with the statutory instrument later in 2016.

2.17 Announcement of New and Extended Enterprise Zones (EZs)

The government has announced the creation of three new Enterprise Zones and the extension of an existing Zone. Secondary legislation will be introduced in 2016 to set out the specific areas which will able to receive the Enhanced Capital Allowance (ECAs).

ECAs in EZs are available to qualifying companies on qualifying expenditure. ECAs provide a cashflow advantage by allowing companies to write off such expenditure more quickly for tax purposes.

2.18 Enhanced Capital Allowances for Enterprise Zone at Coleraine, NI

The Northern Ireland Executive has set out its plans for a pilot Enterprise Zone on two sites near Coleraine, which the government will support by offering enhanced capital allowances to investors within that Zone. Secondary legislation will be introduced in 2016 to set out the specific areas which will able to receive the Enhanced Capital Allowance (ECAs). ECAs in EZs are available to qualifying companies on qualifying expenditure.

2.19 Annual Updates to the Schemes for energy-saving and water technologies

As announced at Budget 2016, the lists of energy-saving and water-efficient technologies that qualify for Enhanced Capital Allowances are updated annually at Budget. The lists will be updated to:

• create a new sub-technology for early leak warning
• clarify the qualifying criteria for Leak Detection Equipment
• amend the criteria for converter-fed motors
• modify 10 existing technologies to reflect technological advances and changes in standards and clarify the qualifying criteria
• remove the Integrated Motor Drive Units

These changes update the qualifying criteria to reflect technological advances and changes in standards. The changes will be given effect via statutory instrument in July. A tax information and impact note will be published with the statutory instrument.

2.20 Plant and Machinery: lease accounting changes

The government will publish a discussion document in spring 2016 with options for change to the tax treatment of leases of plant and machinery in response to the International Accounting Standards Board’s new lease accounting standard (IFRS 16).

Other income tax

2.21 Part surrenders and part assignments of life insurance policies

As announced at Budget 2016, the government will change the current tax rules for part surrenders and part assignments of life insurance policies to prevent excessive tax charges arising on these products. The government will consult later this year on alternatives to the current rules with a view to legislating in Finance Bill 2017.

2.22 Life insurance policies (personal portfolio bonds)

As announced at Budget 2016, the government will consult later in 2016 on updating the list of assets that life insurance policyholders can choose to invest in without giving rise to an annual tax charge under the personal portfolio bond legislation. This is with a view to legislating, if appropriate, in Finance Bill 2017.

2.23 Unfunded Employer Financed Retirement Benefit Schemes (unfunded EFRBS)

As announced at Budget 2016, following the informal consultation announced at Autumn Statement the government will keep this issue under review.

2.24 Pensions Tax Consultation

As announced at Budget 2016, the government published a summary of responses to the consultation on “Strengthening the incentive to save: a consultation on pensions tax relief”.

2.25 Authorised Contractual Schemes

As announced at Budget 2016, the government will consult later this year on measures to streamline the tax rules for investors in Authorised Contractual Schemes and reporting requirements. Any necessary legislation will be introduced in a Finance Bill 2017 or secondary legislation as appropriate.

2.26 Phased rollout of Tax-Free Childcare, with Employer-Supported Childcare remaining open to new entrants until April 2018

The government will introduce Tax-Free Childcare in early 2017, gradually rolling it out in a managed and careful way. As part of the transition to Tax-Free Childcare, Employer Supported Childcare will remain open to new entrants until April 2018. This means that families who join the scheme before April 2018 will continue to be able to access the associated tax and NICs reliefs. Workplace nurseries will be unaffected by the introduction of Tax-Free Childcare.

Corporation Tax

2.27 Oil and gas: Relief for decommissioning expenditure

As announced at Budget 2016, a technical note will be issued that clarifies HMRC’s view of current legislation and confirms that tax relief is available for decommissioning expenditure incurred by the previous licensee of an oil field.

2.28 Corporation Tax - Tax deductibility of corporate interest expense

As announced at Budget 2016, the government will introduce new rules to limit the tax relief that companies can claim for their interest expenses.

In October 2015, the OECD published its recommendations for best practice in this area as one of the outputs from its Base Erosion Profit Shifting (BEPS) project. The government has consulted on the merits and general framework of the recommendations and has decided to introduce rules to limit interest deductions by companies. More information is included in the government’s business tax road map published at Budget. Existing commercial arrangements within the oil and gas ring-fence regime will not be adversely affected.

After further consultation during the spring and summer on the detailed design, the government will publish draft legislation for inclusion in Finance Bill 2017. The new rules will come into effect from 1 April 2017.

2.29 Corporation Tax: reform of loss relief

As announced at Budget 2016, the government will reform the rules governing certain corporate losses carried forward from earlier periods. Firstly, the reform will give all companies more flexibility by relaxing the way in which they can use losses arising on or after 1 April 2017 when they are carried forward. These losses will be useable against profits from different types of income and other group companies. Secondly, companies will have their use of carried forward losses restricted so that they cannot reduce their profits arising on or after 1 April 2017 by more than 50%. This restriction will apply to a company or group’s profits above £5m. Carried forward losses arising at any time will be subject to the restriction. For banking companies, losses that are within the separate bank loss restriction will continue to be subject to those rules (see ‘Bank loss relief restriction: amendment to restriction’). Profits and losses subject to the oil and gas ring-fence regime will be excluded from the loss reform. Following a consultation later in 2016 on the detailed design and implementation of the reform, legislation will be introduced in Finance Bill 2017.

2.30 Museums and galleries tax relief

As announced at Budget 2016, the government will introduce a tax relief for museums and galleries that will be available for temporary and touring exhibition costs. A consultation will run over summer 2016 to determine how the relief will be designed. Legislation will be introduced in Finance Bill 2017.

2.31 Reform of the Substantial Shareholdings Exemption

As announced at Budget 2016, as part of the Business Tax Roadmap, the government will consult on possible reform of the Substantial Shareholdings Exemption for corporate Capital Gains.

2.32 Office of Tax Simplification small companies review

As announced at Budget 2016, the government has received the OTS’s review of small companies and will accept or consider nearly all of its recommendations, including that the OTS continues to develop the design for a look-through taxation system and a new simple business model that protects the assets of the self-employed.

2.33 Transfer pricing administration

As announced at Budget 2016, the government will consult on the introduction of secondary adjustment rules into the UK’s transfer pricing legislation (Part 4, Taxation (International and Other Provisions) Act 2010). The current transfer pricing legislation taxes a company by reference to the profits which would have been made had the arm’s length price been paid, but does not adjust the underlying transaction. This means that some of the cash benefit of the original incorrect pricing is not addressed. Secondary adjustments address that benefit by ensuring the actual allocation of profits is consistent with the primary adjustment made to correct the value of the transaction.

2.34 Corporation tax: payment dates for very large companies

As announced at Budget 2016, the commencement of rules advancing quarterly instalment payments for very large companies (those with profits above £20m) is deferred for two years, so they will have effect for accounting periods commencing on or after 1 April 2019. This follows representations on draft secondary legislation (regulations) and gives companies more time to transition to the new payment schedule of quarterly instalments at months 3, 6, 9 and 12 of a 12-month accounting period, which was announced at Summer Budget 2015. The final regulations will reflect this change to give effect to the new commencement rule.

2.35 Consultation on how to expand corporation tax deductions for contributions to grassroots sport

As announced at Budget 2016, the government will launch a consultation at Budget 2016 on how to expand support that can be given to grassroots sport through the corporation tax system.

Inheritance Tax

2.36 Property held through offshore structures - inheritance tax.

As announced at Budget 2015, the government will consult on proposals to ensure that from 6 April 2017 all UK residential property held indirectly through an offshore structure or trust is chargeable to inheritance tax. Legislation will be introduced in Finance bill 2017 following a consultation on the details.

VAT

2.37 VAT: revalorisation of registration and deregistration thresholds

As announced at Budget 2016, secondary legislation will amend the VAT Act 1994 to increase the VAT registration and deregistration thresholds in line with inflation so that:

• the taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £82,000 to £83,000
• the taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £80,000 to £81,000
• the registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £82,000 to £83,000

HMRC will simultaneously introduce corresponding increases in the thresholds for Income Tax self-assessment ‘three line accounts’ and the Income Tax Cash Basis.

These changes will be effective from 1 April 2016.

2.38 VAT – Introduction of a Fulfilment House Due Diligence Scheme

As announced at Budget 2016, the government will introduce a new scheme for fulfilment houses from 2018 which will set out standards of due diligence and record-keeping, and introduce penalties for non-compliance. The scheme will have an online registration service.

The government invites views on the scheme via a consultation entitled “Fulfilment House Due Diligence Scheme” and a tax impact assessment is included within this document.

The consultation will run from 16 March to 30 June 2016 and responses will be published later in the year. HMRC will also consult on draft legislation later this year which will be introduced in Finance Bill 2017.

Indirect tax and Excise Duties

2.39 Tackling illicit tobacco: sanctions

As announced at Budget 2016, the government will consult on detailed proposals on sanctions to tackle illicit tobacco. This follows an informal targeted consultation that closed on 28 August 2015 which invited views on sanctions and other action to tackle illicit tobacco. Any necessary legislation will be introduced in Finance Bill 2017.

2.40 Heated tobacco products

The government will consult on the duty treatment of heated tobacco products later in 2016. A consultation will help to inform any future decisions on the duty regime for these products. Any necessary legislation will be introduced in a future Finance Bill.

2.41 Minimum Excise Tax (MET)

As announced at Budget 2016, following the earlier consultation the government will introduce a MET for cigarettes. Legislation will be introduced in Finance Bill 2017, at which time the level of the MET will also be set.

2.42 Landfill communities fund reform

Spending review andAutumn Statement 2015 announced the value of the fund for 2016 to 2017 will be set at £39.3 million, with the cap on contributions by landfill operators amended to 4.2% of their Landfill Tax liability. It also announced £20 million of the additional Landfill Tax revenues from this change will be allocated to the Environment Agency to address waste crime over the next 5 years, a simplification of record-keeping requirements and changes to the fund’s objectives from 1 April 2016. These changes will be made by a statutory instrument laid on Budget day 2016.

Following consultation since Autumn Statement, the government does not intend to proceed with the removal of provisions for third parties to contribute 10% of landfill operators’ contributions to projects. Instead, HMRC and the fund’s regulator will publish guidance indicating that government expects to see landfill operators make a greater contribution to the fund.

A tax information and impact note for this measure is published on this page.

2.43 Aggregates levy: consultation on exemption for laying underground utility pipes

As announced at Budget 2016, the government will consult during 2016 on the introduction of a new aggregates levy exemption for aggregate which is an unavoidable by-product when laying underground utility pipes. Any legislative changes required would be included in Finance Bill 2017.

2.44 Landfill Tax reform

As announced at Budget 2016, the government will consult during 2016 on the definition of a taxable disposal. This follows litigation on whether material is ‘used’ at a landfill site. Any legislative changes required will be included in Finance Bill 2017 (and secondary legislation if necessary).

2.45 Alcohol strategy

As announced at Budget 2016, the government is committed to modernising alcohol taxes to tackle fraud and reduce burdens on alcohol businesses. On 24 March, HMRC will publish a new alcohol strategy. Its aims, working with other enforcement agencies and the alcohol industry, are to:

• promote good compliance – making it easier for businesses to pay the right duties
• prevent tax losses – making it harder to make mistakes or to deliberately cheat, including tightening regulations to address vulnerabilities, and exploring technology to track the distribution of alcohol
• respond to those who cheat – increasing the impact of enforcement

The new strategy also confirms HMRC’s plans to consult on:

• reform of procedures for the collection of alcohol duty
• the feasibility and impacts of specific anti-fraud measures

2.46 Air Passenger Duty (APD) – Rates for 2017 to 2018

As announced at Budget 2016, legislation will be introduced in Finance Bill 2017 to increase air passenger duty rates in line with RPI from 1 April 2017.

2.47 Remote gaming duty: freeplays

As announced at Budget 2016, Legislation will be introduced in Finance Bill 2017 to amend the definition of gaming payments and prizes, and change the tax treatment of freeplays, for remote gaming duty. This will ensure that when a person uses a freeplay to participate in gaming these will have a value for calculating the operator’s dutiable profit, but freeplays given as prizes will not reduce that profit.

2.48 Carbon Price Support (CPS) rates

Budget 2014 announced that the CPS rate per tonne of carbon dioxide (CO2) will be capped at a maximum of £18 from 2016 to 2017 until 2019 to 2020, in effect capping the CPS rate for each of the individual taxable commodities across this period at around 2015 to 2016 levels.

Budget 2015 announced that the commodity rates for 2017 to 2018 and the indicative commodity rates for 2018 to 2019 and 2019 to 2020 would be unchanged.

Budget 2016 has confirmed the unchanged commodity rates for 2018 to 2019 and the unchanged indicative commodity rates for 2019 to 2020. It has also announced that the £18 per tonne of CO2 cap will increase in line with RPI in 2020 to 2021. The commodity rates for 2020 to 2021 will be similarly uprated and included in Finance Bill 2018 and future secondary legislation. A further announcement about future CPS rates will be made at Autumn Statement 2016.

The CPS rates from 1 April 2016 to 31 March 2021 are set out in Annex B.

2.49 CRC energy efficiency scheme

The government will abolish the CRC energy efficiency scheme following the 2018 to 2019 compliance year, with no purchase of allowances required to cover emissions used from April 2019. Organisations will report under the CRC for the last time by the end of July 2019, with a surrender of allowances for emissions from energy used in the 2018 to 2019 compliance year by the end of October 2019. The government will work with the Devolved Administrations on scheme closure arrangements. Allowance prices for CRC compliance years 2016 to 2017, 2017 to 2018 and 2018 to 2019 will increase in line with RPI. The government intends to legislate for these changes by a statutory instrument.

2.50 Soft Drinks Industry Levy

As announced at Budget 2016, the government will introduce legislation in Finance Bill 2017 to encourage the reformulation of drinks that are high in added sugar by levying a unit charge on UK producers and importers of such drinks. There will be an exemption for smaller producers. HMRC will consult on the detail in Summer 2016 and the levy will come into effect in 2018.

Tax administration

2.51 Defining reasonable care

As announced at Budget 2016, the government will consider clarifying in statute what constitutes ‘reasonable care’ in avoidance penalty cases, to include making clear that avoiders cannot rely on generic, third party legal advice received via the promoter or other enabler of the scheme.

2.52 Tackling avoidance enablers

As announced at Budget 2016, the government intends to explore new options to ensure that avoidance scheme promoters and other intermediaries who ‘enable’ scheme sale and use face greater, direct consequences when one of their schemes fails.

2.53 Modernising the VAT Disclosure Regime (VADR)

As announced at Budget 2016, the government intends to consult over the summer on reform of the VAT Disclosure Regime (VADR) to expand coverage to other indirect taxes and align more closely with the Disclosure of Tax Avoidance Schemes (DOTAS) model which covers direct taxes.

2.54 Penalty for participating in VAT fraud

As announced at Budget 2016, the government will consult on the idea of a new penalty for participating in VAT Fraud. The consultation document will be published in Spring 2016. If, following consultation, the government decides to legislate, draft legislation will be published, for further consultation, with the intention of introducing final legislation in Finance Bill 2017.

2.55 Business Tax - Making Tax Digital

At the March 2015 Budget, the government committed to transform the tax system through digital technology and end the need for annual tax returns. At the Spending Review and Autumn Statement 2015, the government announced a major investment in HMRC to deliver this as well as a new requirement on businesses, self-employed people and landlords to keep digital records and provide updates to HMRC at least quarterly. As part of this transformation, HMRC will publish a number of consultations later in 2016 covering use of digital tools to keep records and report information to HMRC, options to make greater use of third party data to prepopulate digital tax accounts and changes to the tax administration framework reflecting the transition to digital. The government will respond to these consultations at Autumn Statement 2016 with draft legislation for Finance Bill 2017.

In addition, and to make further progress towards this vision, the Budget announces that from 2018 businesses, self-employed people and landlords who are keeping their records digitally and providing regular digital updates to HMRC will be able to adopt pay-as-you-go tax payments, enabling them to choose payment patterns that suit them and better manage their cash flow. The government will consult in 2016 on how best to implement a pay-as-you-go system.

2.56 Simplifying tax rules for businesses, self employed and landlords

The government will also consult on a number of further options to simplify the tax rules for small businesses and ensure regular updates work smoothly.

2.57 Offshore evasion requirement to correct

As announced at Budget 2016, the government will introduce a new legal requirement for taxpayers to come forward and correct any past offshore non-compliance with new sanctions for failure to do so. The new requirement will underpin the offshore disclosure facility and operate ahead of the widespread reporting of information under the Common Reporting Standard in 2018. A formal consultation on the detail of the requirement will be published later this year.

2.58 PAYE Settlement Agreements (PSAs)

As announced at Budget 2016, and in response to the 2014 review of employee benefits and expenses by the Office of Tax Simplification (OTS), the government will consult on proposals to simplify the process for applying for and agreeing PSAs.

A consultation will be held over summer 2016.

2.59 Amendment to the Customs and Excise Management Act 1979

Legislation to be introduced in Finance Bill 2017 to clarify the powers that allow officers of HM Revenue and Customs to use force to gain access to a locked vehicle, when stopping and searching it, which they suspect contains goods liable to forfeiture.

2.60 Tackling the Hidden Economy: Conditionality

As announced at Budget 2016, the government will consult, over the summer, on the principles of making access to licenses or services for businesses conditional on them being registered for tax. This will include consideration of what services or licenses could be conditional on registration, and ways to minimise burdens on business.

2.61 Tackling the Hidden Economy: Tougher sanctions

As announced at Budget 2016, the government will consult, over the summer, on new sanctions on those who repeatedly and deliberately participate in the hidden economy, including potential tough penalties and monitoring of repeat offenders.

2.62 Tackling the Hidden Economy: Access to data held by Money Service Businesses

As announced at Budget 2016, the government will also consult, over the summer, on new powers to enable HMRC to gather data held by Money Service Businesses for tax compliance purposes. This is ahead of potential legislation in Finance Bill 2017.

2.63 Office of Tax Simplification next reviews

The government will commission the OTS to review the impacts of moving employee NICs to an annual, cumulative and aggregated basis and moving employer NICs to a payroll basis. It will also commission the OTS to review the options to simplify the computation of corporation tax. The Terms of Reference for both reviews will be published shortly.

2.64 Office of Tax Simplification IT/NICs Closer Alignment review

The government welcomes the OTS’s report into income tax and NICs alignment and will respond in due course.

2.65 Abolishing Class 2 National Insurance contributions (NICs)

As announced at Budget 2016, the government will abolish Class 2 NICs from April 2018. The government will publish its response to the recent consultation on benefit entitlement for the self-employed in due course. This will set out details of how the self-employed will access contributory benefits after Class 2 is abolished. The government will legislate for these changes in a forthcoming NICs Bill.

2.66 Restrict entitlement of the Employment Allowance from employers of illegal workers

Regulations will be introduced to exclude employers from claiming the National Insurance contributions Employment Allowance for one year, if they have received a civil penalty from the Home Office for employing illegal workers. The first period under assessment will be the tax year 2017 to 2018 with exclusions coming into force from 2018 to 2019.