Following last week’s Summer Budget, the Finance Bill 2015/16 was published on Wednesday 15 July. It will have its second reading on 20 July, and the committee stage and the other remaining stages will take place after the House of Commons returns from summer recess (i.e. after 7 September).
The Bill:
legislates to the lock on income tax rates and VAT for the duration of this parliament;
increasing the personal allowance and higher rate thresholds in 2016/17 and 2017/18 as announced in the Budget;
increases the ‘effective’ inheritance tax threshold for married couples and civil partners to £1m in 2020/21;
cutting the corporation tax rate to 19% in 2017 and 18% in 2020;
sets the annual investment allowance at the permanent higher level of £200,000 for the rest of the parliament;
introduces a new 8% tax on banking sector profits from January 2016;
restricts pensions tax relief for top earners by reducing the annual allowance for those with a total income of over £150,000.
Measures with immediate effect are:
Controlled foreign companies loss restriction: measures which stop losses and other surplus expenses from being set off against the CFC charge on the profits of CFCs. A CFC charge arises to a UK company in relation to profits from its CFCs which have been diverted from the UK. The measure applies to profits which arise on or after 8 July 2015.
Capital gains tax treatment of carried interest: This measure is said to ‘make the tax system fairer’ by ensuring that individuals to whom a gain arises in the form of carried interest are taxed on their true, economic gain; and that planning tools – designed to ensure they are taxed on a lower figure, to achieve a lower effective rate of tax – are not effective. This measure will have effect on all carried interest arising on or after 8 July 2015, whenever the arrangements were entered into.
Restriction of corporation tax relief for business goodwill amortisation: This measure removes CT relief for companies which write off the cost of purchased goodwill and certain customer related intangible assets. Relief will still be available if the goodwill is sold. The changes apply to all acquisitions made on or after 8 July 2015 unless made pursuant to an unconditional obligation entered into before that date. It also applies to all goodwill created on or after that date.
Disposal of stock other than in trade, and corporate intangibles: This measure will ensure that the tax rules applying to transfers of trading stock or intangible fixed assets between related parties bring into account the correct values for tax purposes. The intention is to prevent attempted avoidance by ensuring that, as far as possible, values brought into account are equivalent to those that would be achieved in a sale to an unconnected third party. The measure will have effect for transfers of trading stock or intangible fixed assets made on or after 8 July 2015.
Simplification of HMRC debtor and creditor interest rate: This measure ensures that rates of interest payable on tax related debts to which HMRC is a party are all contained within tax legislation. It will have effect on and after 8 July 2015.
Restricting tax relief for banks' compensation payments: This measure will ensure that corporation tax receipts are not affected by large compensation payments made in relation to banks’ past misconduct and management failures, ensuring that the sector makes an appropriate contribution to restoring the public finances. This measure applies to compensation expenditure arising after on or after 8 July 2015. Customers with an accounting period straddling the commencement date are required to apportion expenses between the pre- and post- commencement periods on a just and reasonable basis.
David Gauke, financial secretary to the Treasury, said the Bill ‘builds on our efforts to create a stable tax system that supports our long-term economic plan’.
Following last week’s Summer Budget, the Finance Bill 2015/16 was published on Wednesday 15 July. It will have its second reading on 20 July, and the committee stage and the other remaining stages will take place after the House of Commons returns from summer recess (i.e. after 7 September).
The Bill:
legislates to the lock on income tax rates and VAT for the duration of this parliament;
increasing the personal allowance and higher rate thresholds in 2016/17 and 2017/18 as announced in the Budget;
increases the ‘effective’ inheritance tax threshold for married couples and civil partners to £1m in 2020/21;
cutting the corporation tax rate to 19% in 2017 and 18% in 2020;
sets the annual investment allowance at the permanent higher level of £200,000 for the rest of the parliament;
introduces a new 8% tax on banking sector profits from January 2016;
restricts pensions tax relief for top earners by reducing the annual allowance for those with a total income of over £150,000.
Measures with immediate effect are:
Controlled foreign companies loss restriction: measures which stop losses and other surplus expenses from being set off against the CFC charge on the profits of CFCs. A CFC charge arises to a UK company in relation to profits from its CFCs which have been diverted from the UK. The measure applies to profits which arise on or after 8 July 2015.
Capital gains tax treatment of carried interest: This measure is said to ‘make the tax system fairer’ by ensuring that individuals to whom a gain arises in the form of carried interest are taxed on their true, economic gain; and that planning tools – designed to ensure they are taxed on a lower figure, to achieve a lower effective rate of tax – are not effective. This measure will have effect on all carried interest arising on or after 8 July 2015, whenever the arrangements were entered into.
Restriction of corporation tax relief for business goodwill amortisation: This measure removes CT relief for companies which write off the cost of purchased goodwill and certain customer related intangible assets. Relief will still be available if the goodwill is sold. The changes apply to all acquisitions made on or after 8 July 2015 unless made pursuant to an unconditional obligation entered into before that date. It also applies to all goodwill created on or after that date.
Disposal of stock other than in trade, and corporate intangibles: This measure will ensure that the tax rules applying to transfers of trading stock or intangible fixed assets between related parties bring into account the correct values for tax purposes. The intention is to prevent attempted avoidance by ensuring that, as far as possible, values brought into account are equivalent to those that would be achieved in a sale to an unconnected third party. The measure will have effect for transfers of trading stock or intangible fixed assets made on or after 8 July 2015.
Simplification of HMRC debtor and creditor interest rate: This measure ensures that rates of interest payable on tax related debts to which HMRC is a party are all contained within tax legislation. It will have effect on and after 8 July 2015.
Restricting tax relief for banks' compensation payments: This measure will ensure that corporation tax receipts are not affected by large compensation payments made in relation to banks’ past misconduct and management failures, ensuring that the sector makes an appropriate contribution to restoring the public finances. This measure applies to compensation expenditure arising after on or after 8 July 2015. Customers with an accounting period straddling the commencement date are required to apportion expenses between the pre- and post- commencement periods on a just and reasonable basis.
David Gauke, financial secretary to the Treasury, said the Bill ‘builds on our efforts to create a stable tax system that supports our long-term economic plan’.
