Finance Bill report stage schedule
FInance Bill report stage takes place in the House of Commons today and tomorrow. For the uninitiated the discussions can sometimes be a little confusing. So here is what they will be discussing in each group of amendments. Some of the wording is taken from the Government's notes, some is our own description of what we think an amendment is trying to do. Government amendments are listed first, with opposition and backbench amendments in each group afterwards, in bullet point format, as they are unlikely to be passed (though may still dominate debate).
Day 1 - Monday 5 September
Discussion One - Corporation Tax
- Govt Amts 1-131 and 154-160 to Clause 65 & Schedule 10: Hybrid and other mismatches
The government is proposing a number of amendments to Clause 65 which respond to points raised on the legislation by stakeholders particularly with respect to the rules dealing with mismatches involving permanent establishments, which were first published at Budget 2016. Detailed consultation with stakeholders on this aspect of the rules has only taken place recently. These amendments take into account a number of issues raised by stakeholders.
In particular, these amendments adjust the scope of the hybrid and other mismatch rules in relation to permanent establishments (PEs), in order to preserve the existing treatment of certain PE losses, and to clarify the interaction with the existing UK foreign PE exemption rules. In addition, there are a number of technical amendments which are required to ensure that the legislation operates as intended.
Amendments 154-160 take account of additional issues raised by stakeholders after the publication of amendments 1-131. These further amendments deal with a small number of specific technical points, and are necessary to ensure that the legislation operates as intended.
- Govt amts 152-153 to Clause 63 & Schedule 9: Profits from the Exploitation of Patents, etc
Clause 63 and Schedule 9 introduce changes to the Patent Box to ensure that it complies with a new international framework set out by the Organisation for Economic Co-Operation and Development (OECD). 2. The amendments correct a technical problem with the legislation which could result in different definitions of the same term ("Qualifying Residual Profit") applying in the same parts of the modified Patent Box legislation.
- NC5 (Lab) proposes a review of CT treatment of the oil and gas industry
- NC10 (Lab) proposes a review of the patent box
- NC11 (Lab) proposes an assessment of the tax regime for securitisation companies
- Amt 177 (Lib Dem) removes the charge to CT for 2017
- Amt 162 (Lab) opposes cut in CT in 2020
Discussion Two - Tax avoidance and evasion
- Govt amts 136 and 137 to Clause 155: General Anti-Abuse Rule: Provisional Counteractions
These amendments ensure that the GAAR procedural changes work as intended, and ensure that consequences that already result from a provisional GAAR counteraction apply equally for the new GAAR counteraction procedures. They do this by making a small change to new section 209B (4) to include a "pooling notice" under new paragraph 1 of Schedule 43A within the provisional counteraction rules.
Full explanatory note (very brief)
- NC12 (Lab) would require a report on the impact of the criminal offences relating to offshore income, assets and activities (including number of people charged and convicted)
- Amts 167-9 (Lab) change the provision in clause 163 that HMRC may publish details of deliberate offshore tax defaulters to a provision that they must do so
- Amts 171-3 (Lab) amend the provision in relation to three new offshore tax offences to read: “It is a defence for a person accused of an offence under this section to prove that the person had a reasonable excuse for [the relevant failure] and that the person had an honest belief that all of the information included was true and accurate.” (underlined text is Labour’s addition) (This appears to make it harder to offer a defence by adding an additional requirement, though it is possible this is a clumsy attempt to make it easier to offer a defence by adding an alternative defence – if the latter the text is at best ambiguous)
- Amt 145 (cross-party led by Caroline Flint) amends schedule 19 (Large businesses: tax strategies and sanctions) to enable HMT, by regulations, to require a group tax strategy to include a country-by-country report
- Amts 163-4 (Lab) amend schedule 20 (Penalties for enablers of offshore tax evasion or non-compliance) to potentially increase the penalty payable by an enabler, by amending the relevant provisions to make the penalty the higher of (a) 100% / 50% of the potential lost revenue, (b) £3,000, or (c) 100% of any fee paid to the enabler in respect of enabling the other person to carry out offshore tax evasion or non-compliance. (underlined text is Labour’s addition) (occasions when the fee will exceed the potential lost revenue will surely be pretty rare?)
- Amts 165-166 (Lab) amend schedule 21 (Penalties relating to offshore matters and offshore transfers) to slightly increase the minimum penalties for cases where there has been a disclosure (prompted or unprompted)
- Amt 170 (Lab) amends schedule 22 (Asset-based penalty for offshore inaccuracies and failures). It appears to contain an error. It is presumably intended to increase the potential size of an asset-based penalty by increasing the percentage of the value of the asset considered in the setting of the penalty from 10% to 15% but the text of the amt proposes changing it from 100% (a figure which does not appear in this line of the Bill) to 15%.
Discussion Three - VAT on women's sanitary products
- Govt amt 161 to Clause 125: VAT: Women's Sanitary Products
Clause 125 makes provision for the zero-rating of women’s sanitary products. Amendment 161 provides that the date this will happen “must not be after the later of 1 April 2017 and the earliest date that may be appointed consistently with the United Kingdom's EU obligations.” This appears to be an attempt by the Government to respond to pressure (see other amendments below) for early action on this rate, while not breaching our EU obligations.
- Amt 140 (Con backbench (Christopher Chope)) would zero rate women’s sanitary products from 1 January 2017; amt 142 (Lab) would zero rate women’s sanitary products no later than 1 April 2017; amt 144 (Lab) would zero rate women’s sanitary products no later than 1 April 2018
- NC4 (Lab) would require an assessment of the revenue raised from VAT on women’s sanitary products since 1/1/01 along with information about government policy relating to this revenue
Day 2 - Tuesday 6 September
Discussion One - Capital gains tax
- Govt amts 149 to 151 to Clause 82 and Schedules 11 and 12: Reduction in rate of capital gains tax
The amendments introduce a comprehensive definition of "carried interest gains" which remain taxable at the upper rates. The term includes gains which are treated as accruing when carried interest arises, as well as gains which actually accrue and which form part of the recipient's carried interest. Gains which correspond to those receivable by investors in a scheme are excluded.
- NC14 (Lab) requires the production a report giving HMT’s assessment of the value for money provided by Entrepreneur’s Relief
- Amt 174 (Lab) deletes clause 82, removing the cut in CGT from the Bill; amt 178 (Lib Dem) would have the same effect
- Amt 143 (Con backbench (Kevin Hollinrake)) would amend clause 82 to move residential property disposals to an occupying tenant from the category of higher rate chargeable gains, charged at 28%, to the lower rate, charged at 20%
- Amts 175-6 (Lab) amend schedule 14 (Investors’ Relief) to impose a sunset clause on Investors’ Relief, meaning it would expire after five years unless an order passed both Houses of Parliament keeping it in force
Discussion Two - Everything else
- Govt new clause 9: Tax treatment of supplementary welfare payments: Northern Ireland
This clause introduces a power for HM Treasury to make regulations which make supplementary payments, paid by the Northern Ireland Executive (NIE) to benefits claimants affected by welfare reform, either exempt from income tax or chargeable on a different basis.
As part of an agreement to implement welfare reform equivalent to that established in the rest of the UK since 2012, the NIE agreed to provide 'transitional protection' to claimants if their income is reduced compared to pre-reform levels. This will be in the form of supplementary payments which will, for a transitional period, top up claimants' benefits to the level of income they were receiving prior to welfare reform. The government announced (at Budget 2016) that legislation would be introduced to exempt these supplementary payments from income tax.
- Govt amts 132 to 134 to Clause 18: Employment Income provided through third parties
Clause 18 introduces a number of amendments to the employment income provided through third parties rules. One of these changes was to restrict a transitional relief on investment returns accruing on disguised remuneration in order to encourage those who used certain types of disguised remuneration schemes to settle their liabilities. These amendments change the date on which the transitional relief is withdrawn from 1 December 2016 to 1 April 2017 in order to ensure that all those who want to reach a settlement with HMRC before the deadline, in order to continue to benefit from the relief, have sufficient time to do so.
- Govt amts 146-148 to Clause 19: Pensions: Standard lifetime allowance from 2016-17
The level of the standard lifetime allowance is being reduced to £1 million with effect from 6 April 2016. A number of consequential changes are being made to FA 2004 to ensure that, following this reduction, individuals are not unfairly impacted by the change. These amendments ensure that, where benefits are paid to beneficiaries after 6 April 2016, following the death of a member before 6 April 2016, the benefits are tested against the standard lifetime allowance in force at the time of the member's death.
- Govt amt 135 to Clause 31: VCTs: requirements for giving approval
This amendment adds short term deposits of money, including bank deposits, to the list of non-qualifying investments a venture capital trust (VCT) may make.
- Govt amt 138 to Clause 5 and Schedule 1: Abolition of dividend tax credits etc.
Technical amendment to ensure the provisions in Schedule 1 governing the abolition of the dividend tax credit operate as intended. The change makes sure that all tax paid on dividend income within the first £1,000 of a trust's income goes into the tax pool.
- Govt amt 139 to Clause 152 and Schedule 17: Fuel Duty Aqua Methanol
This amendment changes the Implementation date for the reduced rate of duty for aqua methanol from 1 October 2016 to 14 November 2016. The commencement date has been amended as a result of the timing of the passage of this Finance Bill and to allow for the regulations referred to in this schedule to be made before the new duty rate comes into effect.
Full explanatory note (very brief)
- NC2 (Con backbench (led by David Burrowes)) proposes a review of the impact of the duty regime for high-strength cider
- NC3 (Con backbench (led by David Burrowes)) proposes a review of the operation of the transferable tax allowance for married couples and civil partners, including how it could be changed to target low-income families with young children
- NC6 (SNP) proposes a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service
- NC7 (SNP) proposes a review of the tax treatment of Scottish Limited Partnerships including the impact of the tax regime on avoidance and evasion by such partnerships
- NC8 (SNP) proposes a review of the impact on directors of micro-businesses of changes to tax on dividend income implemented by this Finance Bill, including options for amending the law to minimise the impact on such directors on low incomes
- NC13 (Lab) requires the Treasury to produce a report on the UK Tax Gap, and sets out in some detail what must be included, including an assessment of the efficacy of HMRC’s performance in dealing with the tax gap, an assessment of the efficacy of the GAAR, and an assessment of the impact on tax revenues of a number of possible changes to transparency requirements for UK Crown Dependencies and Overseas Territories
- NC15 (Lab) would prevent any attempt to raise VAT on installation of energy saving materials through a parliamentary order
- NC16 (Lib Dem) proposes a review of the impact of various measures within the Bill (changes to income tax, pensions, CGT, IHT and insurance premium tax) on intergenerational fairness
- Amt 179 (Lib Dem) would amend clause 99 to exclude qualifying bonus payments in the determining of a person’s pay bill for a particular tax year for Apprenticeship Levy purposes
- Amt 141 (Lab backbench (Jonathan Reynolds)) would amend schedule 3 (Employee share schemes: minor amendments) to insert a provision for small amounts of partnership share money repayable to employees to be exempt from tax if instead applied charitably
By George Crozier, CIOT Head of External Relations.