Summer Bill delayed till September, but sunny news on MTD
The Government has announced that the Summer Finance Bill will not be published until after the summer recess (which means September 5th at the earliest). However it has provided some information about the content of the Bill and when measures will take effect.
Specifically it has confirmed that the Bill will contain the provisions withdrawn from the pre-election Finance Bill. It is very strongly implied that all of the provisions withdrawn will return. In particular, in relation to provisions applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming Finance Bill, it is stated explicitly that “there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced.” The Government has published a document explicitly listing the 34 provisions to which this applies.
The Government state the Bill will legislate for policies that have already been announced. This appears to rule out new measures being sprung on us, though does not necessarily rule out some previously announced measures (eg in Budget March 2017) being added. However given that there will be a further Finance Bill in December specifically to implement these measures (which are fairly limited in number anyway) that seems unlikely.
While no further information has been released on the Bill's timetable it seems likely that it will be published during the two week September session (Sept 5th -14th) before the party conferences, potantially with second reading debate during that period too. Committee stage is likely to take place once Parliament has returned on October 9th (though we assume not on Oct 9th-10th when SNP conference will still be in session) with report stage, Lords proceedings and Royal Assent in the first half of November ahead of a Budget thought likely to take place on Nov 15th or 22nd. As indicated above, another (shorter) Finance Bill is expected shortly after that, which will be debated mostly in January and February, getting its Royal Assent before the new tax year kicks in in April.
Updated draft provisions
While the Bill will not be published until September the Government have published some updated draft legislation. They explain this thus: “In the case of some provisions that will apply from a time before the Bill is introduced, technical adjustments and additions to the versions contained in the March Bill will be made on introduction to ensure that they function as intended. To maximise certainty about the exact provisions that will apply, the Government is today publishing updated draft provisions.”
The areas covered by updated draft provisions are as follows:
Carried forward losses and counteraction of avoidance arrangements Corporate interest restriction Deemed domicile: Income Tax and Capital Gains Tax Employment income provided through third parties Hybrid and other mismatches - updated legislation Inheritance Tax on overseas property representing UK residential property Substantial Shareholding Exemption: institutional investors
For links to the updated draft provisions, click here.
In our response to the Finance Bill announcement, CIOT President John Preston said that taxpayers and their advisers would still have questions on the detail of the Finance Bill measures including cases where quarterly payments are required before legislation is passed.
He noted that a number of amendments to the previous bill were known to be required to make the legislation work effectively and fairly, especially in relation to the interest deductibility rules, and it is hoped that these will be included in the bill published in September. He added that taxpayers would be helped further if HMRC could publish updated draft guidance on the Bill’s provisions over the summer.
Introducing legislation retrospectively like this is clearly not ideal, but we felt the timing of the Finance Bill and the election left the government in a quandary with no perfect options. Looking forward, the move to an autumn Budget and winter Finance Bill, with a promise it will be passed before measures take effect the following April, will hopefully mean that this will be the last time we have this problem.
Making tax digital
The Government have announced substantial changes to Making Tax Digital:
only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes they will only need to do so from 2019 businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
HMRC will start to pilot MTDfB for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system.
CIOT and LITRG are among the organisations to have pressed for a relaxation of the MTD timetable and we welcomed the announcement:
Delayed digital start date will make for better implementation (CIOT)
A more measured start to Making Tax Digital will better serve its aims (LITRG)
The full statements on the Finance Bill (including MTD changes) can be read here: news story; written ministerial statement.
George Crozier CIOT Head of External Relations