Policy paper

Overview of legislation in draft

Updated 10 December 2015

1. Income tax

Savings and dividends

1.1. 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.

Following consultation, the government is also considering the case for changes to the tax deduction and withholding rules for authorised investment funds, investment trusts and P2P loans, and expects to provide an update as soon as possible. A summary of responses to the consultation was published on 9 December 2015. (Draft clauses 1 and 4 and TIIN)

1.2. Starting rate for savings

As announced at Autumn Statement, the limit for the 0% starting rate for savings will be retained at its current level of £5,000 for 2016 to 2017.

1.3. Dividend taxation and repeal of dividend tax credit

As announced at Summer Budget 2015, legislation will be introduced in Finance Bill 2016 to repeal dividend tax credit and introduce a new dividend allowance and new rates of income tax on dividends. Individuals will pay no tax on the first £5,000 of dividend income. The rates of income tax on dividends received above the allowance will be changed to:

• 7.5% for dividends taxed in the basic rate band
• 32.5% for dividends taxed in the higher rate band
• 38.1% for dividends taxed in the additional rate band

(Draft clauses 2 and 3 and TIIN)

1.4. ISAs: qualifying investments

As announced at Autumn Statement, the list of qualifying investments for the new Innovative Finance ISA will be extended in autumn 2016 to include debt securities issued by companies and offered via crowdfunding platforms. Draft secondary legislation for this change will be published in 2016. The government will also continue to explore the case for extending the list of ISA qualifying investments to include equity crowdfunding.

1.5. ISA and CTF new annual subscription limits

As announced at Autumn Statement, the ISA, Junior ISA and Child Trust Fund subscription limits will be unchanged for 2016 to 2017. The annual ISA subscription limit will remain at £15,240 and the subscription limit for Junior ISA and Child Trust Funds will remain at £4,080.

Reliefs

1.6. Bad debt relief on peer-to-peer lending

As announced at Autumn Statement 2014, legislation will be introduced in Finance Bill 2016 to allow individuals who make loans through peer-to-peer (P2P) platforms to offset bad debts arising against the interest they receive from P2P loans when calculating their taxable income. This measure will have effect for losses incurred on all P2P eligible loans on or after 6 April 2016. It will also allow individuals to make a claim for relief on losses arising on eligible P2P loans between 6 April 2015 and 5 April 2016. A technical guidance note was published on 9 December 2015. (Draft clause 5 and TIIN)

1.7. Exclusion of energy generation from the tax-advantaged venture capital schemes

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 so that any company with a trade consisting substantially of energy generation activities (including the production of gas or other fuel) will be unable to use the tax-advantaged venture capital schemes: the Seed Enterprise Investment Scheme (SEIS), the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). These changes will take effect for the EIS and SEIS in relation to shares issued on or after 6 April 2016 and, for VCTs, in respect of qualifying holdings issued on or after that date.

These energy generation activities will also be excluded from the Social Investment Tax Relief when the scheme is enlarged at a later date. (Draft clause 6 and TIIN)

1.8. Venture Capital Scheme Replacement Capital

As announced at Autumn Statement, legislation will be introduced at a future date to provide increased flexibility for companies to use money invested under the Enterprise Investment Scheme (EIS) and by Venture Capital Trusts (VCTs) for replacement capital, subject to state aids approval.

1.9. Taxation of income from sporting testimonials and benefit matches

As announced at Autumn Statement, 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 club or by an independent testimonial committee, is chargeable to income tax under PAYE. This will apply where the testimonial is granted or awarded on 25 November 2015 or later, and only to ‘events’ that take place after 5 April 2017.

An exemption will be available under the new legislation for the employed sportsperson of up to £50,000 of the income received, either from an individual match or a series of events in a testimonial year. The exemption is available provided that there is no contractual entitlement or customary right to the sporting testimonial or benefit match, and that it is being arranged by an independent testimonial committee. Separate legislation will also be introduced before 6 April 2017 for the National Insurance treatment of testimonial income for employed sportspersons which will follow the income tax treatment.

This follows the announcement at Summer Budget 2015 and public consultation over the summer. A summary of responses to the consultation was published on 9 December 2015. (Draft clauses 37, 38 and 39 and TIIN)

1.10. Non-residents Income Tax exemption for London Anniversary Games and World Athletics and Paralympics Championships

As announced at Autumn Statement, the government will provide a tax exemption for all non-UK resident athletes competing in the 2016 London Anniversary Games, and the 2017 IAAF World Championships and IPC Athletics World Championships also known as the World Athletics Championships. The secondary legislation providing these exemptions will be made in 2016.

Earnings and benefits

1.11. Taxation of company cars: diesel supplement

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to amend Finance Act 2014 with the effect that the appropriate percentage for diesel cars registered on or after 1 January 1998 will continue to include the diesel supplement until 2020 to 2021. (Draft clause 7 and TIIN)

1.12. Statutory tax exemption for trivial benefits in kind

Legislation will be introduced in Finance Bill 2016 to provide a statutory exemption from tax for qualifying trivial benefits in kind costing £50 or less. Employers will no longer be required to report such benefits on either form P11D or via Pay As You Earn Settlement Agreements (PSAs) at the year end. In response to consultation on draft legislation published in December 2014, an annual cap of £300 will be introduced for directors and other office holders of close companies and members of their families and households who are also employees of the company.

There will be a corresponding disregard for those trivial benefits in kind that attract Class 1 National Insurance contributions. Draft secondary legislation for the NICs changes was published for consultation on 9 December 2015.

Changes will be made to the 2007 Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations to apply the exemption to former employees and the annual cap to trivial benefits in kind provided to former directors and office holders and members of their families and households. Draft secondary legislation for these changes was published for consultation on 9 December 2015.

This was first announced at Autumn Statement 2014 and postponed from Finance Act 2015 due to the accelerated parliamentary process in March 2015. (Draft clause 8 and TIIN)

1.13. Employment Intermediaries and tax relief for travel and subsistence

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries’ legislation (IR35) applies, and for individuals working through other employment intermediaries, where the worker is under supervision, direction or control in the manner they carry out the work. The legislation will include provisions for transfer of debt in appropriate circumstances to help ensure compliance. The changes will take effect from 6 April 2016. A response to the consultation was published on 9 December 2015. (Draft clause 9 and TIIN)

1.14. Employer provided living accommodation: call for evidence

As announced at Autumn Statement, in response to recommendations in the 2014 report by the Office of Tax Simplification on simplifying the administration of employee benefits and expenses, the government has issued a call for evidence on the current tax treatment of employer provided living accommodation. The government will use the information collected to consider whether there is a case for making changes to deliver simplification in this area.

The call for evidence will be open from 9 December 2015 until 3 February 2016.

1.15. Salary sacrifice

As announced at Autumn Statement, the government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The government will gather further evidence, including from employers, on salary sacrifice arrangements to inform its approach.

1.16. Employee share schemes: simplification of the rules

As announced at Autumn Statement, 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 April 2016.

(Draft clauses 10 and 11 and TIIN)

1.17. Disguised remuneration schemes

As announced at Autumn Statement the government intends to take action against those who have used disguised remuneration schemes and who have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015.

1.18. Office of Tax Simplification Review of Employment Status

As announced at Autumn Statement the government has responded to the final report of the OTS review of employment status, published in March 2015, and is taking forward the majority of the recommendations.

Pensions

1.19. Pension lifetime allowance

As announced at March Budget 2015 and confirmed at Summer Budget 2015, legislation will be introduced in Finance Bill 2016 to reduce the standard lifetime allowance to £1 million for the 2016-2017 tax year onwards, and provide that it will be increased annually in line with the Consumer Prices Index from 2018 to 2019 onwards. Transitional protection (‘fixed protection 2016 and individual protection 2016’) will be introduced to provide individuals with pension savings of up to £1.25 million protection from retrospective taxation, subject to certain conditions. Changes are also being made to Finance Act 2004 to ensure that individuals who have primary or enhanced protection, with no lump sum protection, receive the pension commencement lump sum intended by the legislation. (Draft clause 12 and TIIN)

1.20. Pensions Tax Relief consultation

At Summer Budget 2015, the government launched a consultation on the system of pensions tax relief, to gather evidence and views on whether the current system incentivises pension saving. As announced at Autumn Statement, the government received several hundred responses to that consultation, and is considering the options for reform carefully. The government will publish its response at Budget 2016.

1.21. Pensions tax: Bridging Pensions

As announced at Autumn Statement and following the introduction of a single tier pension from 6 April 2016, legislation will be introduced in Finance Bill 2016 to allow the pensions tax rules on bridging pensions to be aligned with Department for Work and Pensions legislation. (Draft clause 13 and TIIN)

1.22. Dependants scheme pensions

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to reduce significantly the number of calculations that need to take place to determine whether a dependants’ scheme pension exceeds the authorised limit. The changes will take effect from 6 April 2016. (Draft clause 14 and TIIN)

1.23. Netherlands Benefit Act for Victims of Persecution 1940 to 1945

As Announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to exempt payments to individuals made by the Netherlands government through the ‘Wet uitkeringen vervolgingsslachtoffers 1940 to 1945’ scheme (the scheme) from income tax. This will bring the tax treatment in line with pensions or annuities payable under special provision for victims of National Socialist persecution made by the Federal Republic of Germany or Austria. From April 2016 these payments will no longer be included in the calculation of an individual’s income tax liability. (Draft clause 15 and TIIN)

Transactions in securities

1.24. Company distributions

As announced at Autumn Statement, 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.

A consultation was published on the rules concerning company distributions on 9 December 2015. (Draft clauses 16, 17 and 18 and TIIN)

Trading income

1.25. Extension of averaging period for farmers

As announced at Autumn Statement, and following consultation, legislation will be introduced in Finance Bill 2016 to allow self-employed farmers to choose to average their trading profits over a two or five year period from April 2016. This measure introduces an option of averaging over a five year period and also simplifies the existing two-year averaging rules by removing marginal relief. A summary of responses to the consultation was published on 9 December 2015. (Draft clause 19 and TIIN)

1.26. Fixed-rate deductions for use of home for business purposes by partnerships

As announced at Autumn Statement 2014, legislation will be introduced in Finance Bill 2016 for simplified expenses in sections 94H and 94I ITTOIA. The amendments will ensure that, where appropriate partnerships can take advantage of the simplified expenses rules. (Draft clause 20 and TIIN)

Miscellaneous

1.27. ISAs: tax advantages following the death of an account holder

As announced at Autumn Statement 2015, legislation will be introduced in Finance Bill 2016 to provide for changes to the ISA regulations that will allow the ISA savings of a deceased investor to continue to benefit from tax advantages during the administration of their estate. Draft regulations will be published in 2016 following technical consultation with ISA providers. (Draft clause 21 and TIIN)

1.28. Taxation of performance linked rewards paid to asset managers

As announced at Autumn Statement, and following consultation over summer 2015, legislation will be introduced in Finance Bill 2016 to clarify the circumstances in which performance-related rewards paid to asset managers will be charged to capital gains tax. The change will apply in relation to sums arising to managers on or after 6 April 2016. A summary of responses to the consultation was published on 9 December 2015. (Draft clause 22 and TIIN)

1.29. Gift Aid Small Donations Scheme

As announced at Autumn Statement, the government is bringing forward the review of the scheme that was planned to start in April 2016. The first stage of this review is the publication of a call for evidence document on 9 December 2015. The document is being issued to seek views about the use and effect of the scheme rules.

1.30. Business Investment Relief Scheme changes

As announced at Autumn Statement, legislation will be introduced in a future Finance Bill to cover any proposed changes to Business Investment Relief (BIR). This follows the government’s announcement that it will consult on the details of how to change the rules for Business Investment Relief to make it easier for people who use the remittance basis to bring money into the UK to invest in UK businesses.

1.31. Pensions: secondary annuities market

As announced at Autumn Statement, legislation is to be introduced in Finance Bill 2017 to remove the current pensions tax restrictions on individuals seeking to sell their right to future annuity income. Further details for this measure will be included in the government’s response to the consultation, to be published in December 2015.

1.32. Reform to tax treatment of non-domiciled individuals

Following announcement at Summer Budget 2015 and consultation which ended on 11 November 2015, the government will publish its response to the consultation in early 2016 together with drafts of any necessary amendments to legislation (including transitional provisions).

2. Corporation Tax

Loan relationships

2.1. Corporate debt and derivative contracts

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 as part of the modernisation of the legislation on corporate debt (loan relationships) and derivative contracts announced at Budget 2013. This legislation will address 3 situations where the interactions with accounting rules or other parts of the tax rules may lead to unintended and unfair outcomes. This is in the context of interest-free loans and other loans on non-market terms. The changes will have effect from 1 April 2016. (Draft clauses 23, 24 and 25 and TIIN)

2.2. Loans to participators

As announced at Autumn Statement, legislation will be introduced to exempt loans or advances made by close companies to trustees of charitable trusts, which are applied for charitable purposes, from the loans to participators tax charge. The exemption will apply to loans or advances made on or after 25 November 2015. Draft legislation was published on 25 November 2015. (Draft clause 26 and TIIN)

Creative industry reliefs

2.3. Orchestra Tax Relief

As announced at March Budget 2015, legislation will be introduced in Finance Bill 2016 to allow qualifying companies engaged in the production of orchestral concerts to claim tax relief at a rate of 25% on qualifying expenditure from 1 April 2016. (Draft clauses 27 and 28 and TIIN)

2.4. Museums

As announced at Autumn Statement, the government will explore with the sector the case for introducing a new tax relief for museums and galleries.

Intangible fixed assets

2.5. Partnerships and transfers of intangible assets

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to confirm how the commencement and valuation rules for intangible fixed assets apply to partnerships that have corporate partners or members. The change will apply in relation to debits and credits accruing on or after 25 November 2015. (Draft clauses 29 and 30 and TIIN)

Miscellaneous

2.6. Patent Box: Substantial Activity

Finance Bill 2016 will include legislation 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, although some IP acquired after 1 January 2016 will also be affected. The government consulted on these changes from 22 October 2015 to 4 December 2015. (Draft clauses 31 and 32 and TIIN)

2.7. Hybrid mismatches

As announced at Autumn Statement, legislation will be included in Finance Bill 2016 to deal with hybrid mismatches. This follows a consultation announced at Autumn Statement 2014. The legislation introduces rules to neutralise the effect of hybrid mismatch arrangements in accordance with the recommendations of the OECD’s BEPS project. The aim is to tackle 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 summary of responses to the consultation was published on 9 December 2015. (Draft clause 33 and TIIN)

2.8. Insurance companies carrying on long-term business - amendments to Finance Act 2012

The government will legislate 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. (Draft clause 34 and TIIN)

2.9. Leasing and Capital Allowances Anti-Avoidance

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to counter avoidance of tax through artificially low disposal values for capital allowances purposes and non-taxable payments in arrangements involving transfer of lessee obligations. This measure will ensure that the disposal value is increased so that there is no longer a tax advantage and that payments received for agreeing to assume lease obligations are taxed as income. The changes will take effect for arrangements and agreements on or after 25 November 2015. A tax information and impact note (TIIN) for this measure, together with draft legislation and draft explanatory notes, was published on 25 November 2015. (Draft clauses 35 and 36 and TIIN)

2.10. Bank levy - Consulting on changes

As announced at Autumn Statement, the government will consult on changing the scope of the bank levy to UK operations from 1 January 2021. A consultation was published on 9 December 2015.

2.11. Corporation Tax - Deduction for payments to grassroots sports

As announced at Autumn Statement, 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.

3. Income tax and Corporation Tax

3.1. Capital Allowances: Enterprise Zones

Following the introduction of Enterprise Zones in 2012, Summer Budget 2015 invited local bids for new Zones. Autumn Statement confirmed that secondary legislation will be introduced to establish 26 new Zones, ten of which will provide for enhanced capital allowances for qualifying expenditure. The enhanced capital allowances will be available for expenditure incurred on or after 25 November 2015.

3.2. Reform of the 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 the replacement of furnishings. This follows the public consultation over summer 2015. The deduction will be available in calculating the profits of a property business which includes a dwelling-house. The deduction is available for expenditure on furniture, furnishings, appliances (including white goods) and kitchenware, where the expenditure is on a replacement item provided for use in the dwelling. The deduction given will be for the cost of a like-for-like, or nearest modern equivalent, replacement asset, plus any costs incurred in disposing of, or less any proceeds received for, the asset being replaced. The deduction will be available for expenditure incurred on or after 1 April 2016 for corporation tax payers and 6 April 2016 for income tax payers. This deduction will not be available for furnished holiday lettings because capital allowances will continue to be available for them. A summary of responses to the public consultation was published on 9 December 2015. (Draft clause 40 and TIIN)

4. Capital gains tax and inheritance tax

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

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to correct the Capital Gains Tax (CGT) computations required by non-residents on the disposal of UK residential property. One of the corrections will be retrospective to 5 April 2015 and the other to 26 November. Legislation will also give HMRC powers to prescribe circumstances when a CGT return is not required by non-residents and will add CGT to the list of taxes that the government may collect on a provisional basis. (Draft clauses 41 and 42 and TIIN)

4.2. Amendments to entrepreneurs’ relief following Finance Act 2015 changes

As announced at Autumn Statement, the government will consider bringing forward legislation in Finance Bill 2016 that would amend the changes made by Finance Act 2015 to entrepreneurs’ relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions. Officials have been consulting stakeholders on possible amendments.

4.3. Inheritance tax: domicile

As announced at Summer Budget 2015, the government will introduce legislation to bring the existing deemed domicile provisions for inheritance tax in line with the proposed new deeming rules for non domiciled individuals who are long term resident in the UK. The legislation will also ensure that anyone born in the UK with a UK domicile at birth and who later acquires a domicile of choice elsewhere, will be deemed to be UK domiciled for tax purposes if they are resident in the UK in at least one of the previous two tax years. The consultation on these changes closed on 11 November 2015, therefore the published draft legislation does not take into account any of the representations made to the consultation. HM Treasury will publish a response to the consultation in early 2016, and any necessary amendments to the legislation including transitional provisions will be published at that time alongside further draft legislation covering the income tax and capital gains tax aspects of these reforms. (Draft clause 43 and TIIN)

4.4. 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 also be available when a person downsizes or ceases to own a home, and other assets up to the maximum value of the residence nil-rate band are passed on death to direct descendants. The value of the former property, the amount of residence nil-rate band lost as a result of the downsizing move or disposal, and the value of other assets left to direct descendants will be relevant to the amount of the residence nil-rate band. The change 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. A technical note was published in September 2015 and the draft legislation takes into account the issues raised. (Draft clause 44)

4.5. Inheritance tax and undrawn funds in drawdown pension schemes

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to ensure that a charge to inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death. This will be backdated to apply to deaths on or after 6 April 2011. (Draft clause 45 and TIIN)

4.6. Inheritance tax: compensation and ex-gratia payments for victims of persecution during the World War 2 era

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to legislate Extra Statutory Concession F20, which gives an inheritance tax exemption in respect of certain compensation and ex-gratia payments for World War 2 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. The legislation will apply in respect of deaths on or after 1 January 2015. (Draft clause 46 and TIIN)

4.7. Deeds of variation

As announced at Autumn Statement, following the review announced at March Budget 2015, the government will not introduce new restrictions on how deeds of variation can be used for tax purposes but will continue to monitor their use. A summary of responses to the call for evidence was published on 9 December 2015.

5. VAT

5.1. VAT: refunds to certain bodies

Legislation will be introduced in Finance Bill 2016 to provide for refunds of VAT to non-departmental public bodies and similar bodies, using certain shared service arrangements to support their non-business activities.

Autumn Statement 2014 announced this measure for introduction in Finance Bill 2015, but it was deferred in recognition of the accelerated Parliamentary process for the March 2015 Finance Bill. (Draft clause 47 and TIIN)

5.2. Changes to the reduced rate of VAT for Energy Saving Materials

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to retain as much of the existing reduced rate of VAT for the installation of energy saving materials as possible in compliance with a recent decision of the European Court (CJEU). A consultation on the proposed changes and draft Finance Bill legislation was published on 9 December 2015. (Draft clause 48 and TIIN)

5.3. VAT: reliefs for Isle of Man charities

The definition of ‘charity’ for tax purposes in Finance Act 2010 will be amended by Finance Bill 2016. The amendment will put it beyond doubt that charities subject to the jurisdiction of the High Court of the Isle of Man are capable of qualifying for UK VAT reliefs for charities. (Draft clause 49 and TIIN)

6. Stamp Duty Land Tax and Annual Tax on Enveloped Dwellings

6.1. SDLT: additional properties

As announced at Autumn Statement, the government will introduce higher rates of SDLT on purchases of additional residential properties, including buy to let properties and second homes, from 1 April 2016. The higher rates will be 3 percentage points above the current SDLT rates. The government will consult on the details of the higher rates. Draft legislation will be published for consultation in January 2016.

6.2. SDLT seeding relief

As announced at Autumn Statement, the government will introduce a new relief from SDLT (‘seeding relief’) and make changes to the SDLT treatment of Co-ownership Authorised Contractual Schemes (CoACSs). Seeding relief will relieve the initial transfer of properties into Property Authorised Investment Funds (PAIFs) and CoACSs, to remove barriers to investment in these funds. The legislation will have effect on and after the date of Royal Assent to Finance Bill 2016. (Draft clause 50 and TIIN)

6.3. Annual Tax on Enveloped Dwellings and 15% rate of Stamp Duty Land Tax

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to extend the scope of the reliefs available from Annual Tax on Enveloped Dwellings and 15% rate of Stamp Duty Land Tax 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. These amendments will have effect from 1 April 2016. (Draft clauses 51, 52, 53, 54, 55 and 56 and TIIN)

7. Duties

7.1. Stamp Duty and Stamp Duty Reserve Tax: Deep In The Money Options

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to stop avoidance of Stamp Duty and Stamp Duty Reserve Tax 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. The change will have effect from Budget Day 2016 and apply to options exercised on or after Budget day 2016 but only where they were entered into on or after 25 November 2015. A consultation has been published on 9 December 2015 to ensure there are no unintended effects. (Draft clauses 57 and 58 and TIIN).

7.2. Climate change levy: renewable source electricity

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to set an end date of 31 March 2018 for the transitional period during which electricity suppliers can apply the climate change levy (CCL) exemption for renewably sourced electricity generated before 1 August 2015. This follows the announcement at Summer Budget 2015 of the ending of the exemption and subsequent informal consultation over the summer on the length of the transitional period. A tax information and impact note (TIIN) was issued at Summer Budget 2015 and an updated TIIN was issued on 9 December 2015. (Draft clause 59 and TIIN)

7.3. Landfill Tax: Landfill Communities Fund

As announced at Autumn Statement, the government will introduce secondary legislation in spring 2016 to set the value of the Landfill Communities Fund for 2016 to 2017 at £39.3 milion, with the cap on contributions by landfill operators amended to 4.2%. The legislation will also remove provisions for third party contributions, simplify record keeping requirements and change the scheme’s objects with effect from 1 April 2016. This follows a consultation earlier in 2015. A full response to the HMRC consultation on reform of the fund was published on 25 November 2015. The draft statutory instrument was published for consultation on 9 December 2015. The consultation closes on 3 February 2016. (TIIN)

7.4. Apprenticeship levy

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to provide for the apprenticeship levy. The rate of the levy will be set at a rate of 0.5% of an employer’s pay bill, and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. Draft clauses will be published early in the New Year, and the TIIN will be published at that time.

8. Tax avoidance and evasion

8.1. Anti-Avoidance: Penalties for the General Anti-Abuse Rule

As announced at Autumn Statement, and following consultation over the summer, legislation will be introduced in Finance Bill 2016 for a new penalty of 60% of tax due to be charged in all cases successfully counteracted by the General Anti-Abuse Rule to create a disincentive from entering into abusive tax avoidance. The government will also make small changes to the GAAR procedures to improve its ability to tackle marketed avoidance schemes. A response to the consultation was published on 9 December 2015. (Draft clauses 60, 61 and 62 and TIIN)

8.2. Serial Avoiders and Promoter Of Tax Avoidance Schemes

As announced at Summer Budget 2015, and following consultation over the summer, legislation will be introduced in Finance Bill 2016 that will tackle those who persistently enter into tax avoidance schemes that are defeated by HMRC. After the first such defeat, the taxpayer will have to comply with a special reporting requirement and further defeats will result in a surcharge. After at least four defeats the names of the defeated avoiders can be published, and, for those whose defeats concern the persistent abuse of reliefs, restrictions on them accessing certain tax reliefs for a period will be applied. These measures will come into effect on 6 April 2017.

Legislation will also be introduced in Finance Bill 2016 to widen the Promoters of Tax Avoidance Schemes (POTAS) rules. Under the legislation a promoter may be made subject to the reporting requirements and obligations of the POTAS regime if their schemes are regularly defeated by HMRC. This measure will come into effect at Royal Assent of Finance Bill 2016. A response to the consultation on these measures was published on 9 December 2015. (Draft clauses 63 and 64 and TIIN)

8.3. Publication of large business tax strategies

At Summer Budget 2015, the government announced new measures to improve large business tax compliance, with a consultation over the summer to refine the detail of the measures. Autumn Statement confirmed that following consultation, legislation will be introduced in Finance Bill 2016 to provide a new legislative requirement that large businesses publish their tax strategy as it relates to or affects UK taxation.

The legislation will have effect after Royal Assent to Finance Bill 2016.

As a result of extensive stakeholder engagement over the summer, there are some points of detail which the consultation team have taken into account in the final policy design, but the fundamental policy principle remains the same; the publication of tax strategies will ensure greater transparency around a business’s approach to tax to HMRC, shareholders and consumers. Board level oversight of those strategies will embed tax strategy in existing corporate governance processes. Taken together this should drive behaviour change around tax planning and therefore enhance tax compliance. A response to the consultation was published on 9 December 2015. (Draft clause 65 and TIIN)

8.4. Special Measures to tackle high risk businesses

At Summer Budget 2015, the government announced new measures to improve large business tax compliance, with a consultation over the summer to refine the detail of the measures. Autumn Statement confirmed that, following consultation, legislation will be introduced in Finance Bill 2016 to enable HMRC to use special measures powers to tackle businesses that persistently engage in aggressive tax planning. The legislation will have effect after Royal Assent of Finance Bill 2016.

A response to the consultation was published on 9 December 2015. (Draft clause 66 and TIIN)

8.5. New civil sanctions for enablers of offshore evasion

As announced at Autumn Statement, and following consultation, legislation will be introduced in Finance Bill 2016 to introduce new civil penalties for individuals and businesses which deliberately enable offshore evasion, as well as naming provisions for the most serious enablers. A summary of responses to the consultation was published on 9 December 2015. (Draft clause 67 and TIIN)

8.6. Strengthened civil deterrents for offshore tax evasion

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to increase minimum penalties for deliberate offshore tax evasion, require greater levels of disclosure from tax evaders and increase naming of offshore tax evaders. The legislation also introduces a new penalty based on the value of the asset which led to the evasion. This will apply to serious cases of deliberate offshore tax evasion. A response to the consultation was published on 9 December 2015. Draft legislation for asset based penalty aspects of this measure will be published for consultation in January 2016. (Draft clauses 68 and 69 and TIIN)

8.7. A new criminal offence for tax evasion

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to provide a new criminal offence that removes the need to prove intent for offshore tax evaders. This will apply to only those with significant levels of non-compliance who cannot satisfy the courts that they have taken reasonable care to comply with their UK tax obligations. A response to the consultation was published on 9th December 2015. (Draft clause 70 and TIIN)

8.8. A new legal requirement to correct past offshore tax non-compliance

As announced at Autumn Statement, the government will consult on a new legal requirement for taxpayers to come forward and correct any past offshore non-compliance with associated penalties for failure to do so. The new requirement will underpin the new tougher offshore disclosure facility and operate ahead of the widespread reporting of information under the Common Reporting Standard in 2018. The government will consult on the new requirement in 2016.

8.9. A new corporate offence for failure to prevent the criminal facilitation of tax evasion

As announced at Autumn Statement, the government will consult on draft legislation to create a new criminal offence to apply where a corporation fails to prevent those representing it from criminally facilitating tax evasion. A response to the first consultation was published on 9th December 2015.

9. Tax Administration and OTS

9.1. Making Tax digital

As announced at Autumn Statement, the government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.

9.2. Simple Assessment

As announced at Autumn Statement, 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. This measure will have effect on and after the date of Royal Assent to Finance Bill 2016. (Draft clause 71 and TIIN)

9.3. Time Limits for Self-Assessment returns

As announced at Autumn Statement, legislation will be introduced at Finance Bill 2016 to clarify the time allowed for making a Self-Assessment. Taxpayers will have up to 5 April 2017 to submit returns for tax years up to and including 2012 to 2013.

There are transitional arrangements for the years 2013 to 2014, 2014 to 2015 and 2015 to 2016. Returns for these years are to be submitted by 5 April in the years 2018, 2019 and 2020 respectively.

For tax years 2016 to 2017 and beyond, there will be 4 years from the end of the tax year to make the Self-Assessment. The filing date of 31 January (31 October for paper returns) still remains and late filing penalties may be applicable after this date. (Draft clause 72 and TIIN)

9.4. PAYE - ‘On or Before’ Reporting Obligation Review

As announced at Autumn Statement, HMRC have carried out a review of the ‘On or Before’ reporting obligations for employers. This follows a recommendation by the OTS, and a government commitment at Autumn Statement 2014. Currently, existing micro employers (with 9 or fewer employees) using Real-Time PAYE may take advantage of a reporting relaxation to report all payments they make in a tax month ‘on or before’ the last payday in the tax month rather than ‘on or before’ each and every payday. This is a 2 year temporary relaxation which is legislated to come to an end on 5 April 2016: this measure confirms the temporary relaxation will end, as planned, aligning the treatment of existing micro employers with all other employers. The review concluded that ‘on or before’ reporting remains essential to HMRC in supporting their digital agenda as well as wider government initiatives and in particular Universal Credit and there will be no further reporting relaxations introduced in addition to those permanent reporting easements which are already in place.

9.5. Capital Gains Tax: payment on account

As announced at Autumn Statement, from April 2019 a payment on account of any Capital Gains Tax (CGT) due on the disposal of residential property will be required to be made within 30 days of completion of the disposal. Taxpayers will be able to reconcile their payment on account with their total CGT liability for the year, after the year end. Legislation will be introduced in Finance Bill 2017 and the government will publish draft legislation for consultation in 2016.

9.6. Student loan repayments

As announced at Autumn Statement:

• From April 2016 the income threshold for loans taken out on or after 1 September 2012 is frozen at £21,000 until 5 April 2021
• From April 2019 employers will be asked to start deducting repayments from borrowers of postgraduate loans, at a rate of 6% alongside undergraduate repayments at the existing rate of 9%

Legislation will made by the Department for Business, Innovation and Skills using statutory instruments.

9.7. Simplification of HMRC debtor and creditor interest rate: extension to Scotland, Northern Ireland and National Insurance Contributions

Legislation will be introduced in Finance Bill 2016 to extend the provisions of section 52 Finance (No.2) Act 2015 for England and Wales to Scotland and Northern Ireland, and remove the exclusion of National Insurance contributions from the definition of taxation matter for England and Wales. The clauses set the rates of interest on tax-related judgment debts owed by or to HMRC to appropriate levels given prevailing interest rates and harmonise the rates UK-wide. The new rates of interest will apply to new and existing judgment debts in Scotland and Northern Ireland from the date of Royal Assent to Finance Act 2016. Any interest already accrued under an existing judgment debt will be unaffected. (Draft clauses 73, 74 and 75 and TIIN)

9.8. Gift aid and Intermediaries

Legislation will be introduced in Finance Bill 2016 to allow for the introduction of penalty provisions in respect of gift aid intermediaries if they fail to comply with requirements which will be set out in regulations to be published in 2016. (Draft clause 76 and TIIN)

9.9. Detention and Seizure under Customs And Excise Management Act 1979: Exceptions to notice requirement etc

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to clarify existing provisions in the Customs and Excise Management Act 1979 concerning the seizure and detention of goods. The proposed legislation provides that it is not necessary to give a notice of detention, or a notice of seizure, to any person who has, or appears to have, possession or control over a thing at the point at which it is detained or seized. (Draft clause 77 and TIIN)

9.10. Proceedings under customs and excise Acts: Prosecuting Authorities

Legislation will be introduced in Finance Bill 2016 to amend the Customs and Excise Management Act 1979 to clarify the position of prosecuting authorities. The amendments will correct out-dated references to the prosecuting authorities in Scotland and Northern Ireland and will ensure that time limits for starting proceedings apply only to the correctly identified prosecuting authorities. The legislation will have effect on Royal Assent to Finance Bill 2016. (Draft clause 78)

9.11. Data-gathering from Electronic Payment Providers and Business Intermediaries

Legislation will be introduced in Finance Bill 2016 to identify businesses who are not complying with their tax obligations by extending HMRC’s current data gathering powers. The extended powers will include business intermediaries who facilitate transactions, particularly online, and electronic payment service providers who operate digital wallets, thereby future-proofing legislation to include emerging new data sources. A summary of responses to the consultation was published on 9 December 2015. (Draft clauses 79 and 80 and TIIN)

9.12. Stamp Duty Land Tax: changes to the filing and payment process

As announced at Autumn Statement, the government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018.

9.13. Extension of provisions about set-off to Scotland

As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to extend the provisions of sections 130 and 131 of the Finance Act 2008 to Scotland and provide the same legislative basis for set-off across the UK. (Draft clause 81 and TIIN)

9.14. Excise: Raw tobacco registration scheme

As announced at March Budget 2015, and following consultation, legislation will be introduced in Finance Bill 2016 to require those carrying out a ‘controlled activity’ in relation to raw tobacco to be approved and registered with HMRC. It will also make provision to allow regulations to be made regulating the approval and registration of persons and premises.

The legislation will introduce a new forfeiture power for raw tobacco that is being used otherwise than for a controlled activity. The legislation will also introduce penalties for non-compliance with the scheme linked to the amount of notional duty at risk, as well as regulatory penalties for registration breaches. The scheme will have effect from 1 January 2017 but applications for registration will be accepted from 1 October 2016. (Draft clause 82 and TIIN)

9.15. Permanent establishment of Office of Tax Simplification

As announced at Summer Budget 2015, legislation will be introduced in Finance Bill 2016 to provide for the permanent establishment of the Office of Tax Simplification (OTS) in statute. The legislation will specify the functions of the OTS and make provisions for its governance and operation. The legislation will have effect from an appointed day to be set out by the Treasury in regulations. (Draft clauses 83, 84, 85, 86, 87 and 88 and TIIN)