Administration of Tax
Digital Tax Accounts
The Government w1llabolish the tax return for m1ll1ons of 1nd1V1duals and small bus1ness through the 1ntroduct1on of dig1tal tax accounts.A roadmap sett1ng out the policy and adm1n1strat1ve changes w1ll be published later th1s year. In add1t1on, the Government w1ll consult on a new payment process to support the use of d1g1tal tax accounts that allow tax and National Insurance contnbut1ons to be collected outside of PAYE and self-assessment. Th1s will be leg1slated for 1n the next Parliament.
Direct Recovery of Debts due to HMRC from Debtors' Bank and Building Society Accounts HMRC w1ll be able to collect payment of tax and dut1es d1rectly from cred1t balances 1n debtors' bank and bu1ld1ng soc1ety accounts, 1nclud1ng ISAs, Without first hav1ng to apply to the courts. HMRC will only take act1on aga1nst debtors who owe over £1,000 of tax or tax cred1ts.They w1ll always leave a m1n1mum aggregate of £5,000 across debtors' accounts, and w1ll only put a hold on funds up to the value of the debt. Secondary leg1slat1on to be published shortly w1ll set out details of the process and safeguards for taxpayers.
The Government Intends to leg1slate th1s measure 1n a future F1nance B1ll.
HMRC Tax Enquiries- Closure Rules
The Government has consulted on a proposal to Introduce a new power.enabling HMRC to refer matters to the tax tnbunal w1th a v1ew to ach1ev1ng early resolution of one or more aspects of a tax enquiry, wh1lst leav1ng other aspects of the tax enqu1ry open.The Government IS currently cons1denngthe consultation responses.
UK's Automatic Exchange of Information Agreements
In compl1ance w1th the UK's obligations to 1mprove 1nternat1onaltax compliance,regulations w1ll be Introduced to create due d1l1gence and report1ng obligat1ons for UK flnanc1allnStlt ut1ons. W1th effect from 1 January 2016. the obligations will requ1re financial InStitUtions to:
1dent1fy accounts ma1nta1ned for account holders who are tax res1dent 1nJUriSdiCtions With wh1ch the UK has entered 1nto an agreement to exchange to help tackle tax evas1on; and
collect and report 1nformat1on to HMRC.
The regulat1ons also revoke and replace the current 1mplement1ng regulations for the UK's exchange of Information agreement w1th the USA (FATCA). These new regulations w1ll have effect 21 days from the date that they are laid.
Basic Personal Allowance and Transferable Allowance for 2015/16
The personal allowance for those born after 5Apnl1938 w1llbe £10,600 for 2015/16. As a corollary,the transferable allowance for marned couples and c1v11 partners (10% of the personal allowance) w1ll be £1,060. The h1gher rate threshold (1.e.the aggregate of the personal allowance and the bas1c rate l1m1t) Willbe £42,385.
Personal Allow ance and Basic Rate Limit for 2016/17 and 2017/18
The personal allowance w1ll be £10,800 and £11,000 for 2016/17 and 2017/18 respectively.As a consequence there will no longer beaseparate age-related allowance for2016/17 onwards.The bas1c ratelimtwill be£31,900for2016/17 and£32,300 for 2017/18.The comb1ned effect 1s that the h1gher rate threshold w1ll be£42.700 1n 2016/17 and £43,300 1n2017/18.
Charge for using Remittance Basis
An 1ndiv1dual not dom1ciled 1n the UK who chooses to be taxed on the rem1ttance bas1s on overseas 1ncome and chargeable ga1ns must pay a spec1al add1t1onaltax charge. Th1s is currently £30,000 if the ind1v1dual has been UK
resrdent rn at least 7 of the 9 precedrng tax years or £50,000 rf he has been UK resrdent rn at least 12 of the 14 precedrng years. For 2015/16 onwards the £50,000 chargers to rncrease to £60,000.The £30,000 charge wrll rema1n unchanged.The additional charge will be Increased to a new level of £90,000 1fthe rndrv1dual has been UK resrdent rn at least 17 of the 20 precedrng tax years.
Exemption from Income Tax for the Bereavement Support Payment
W1th effect from a date to be announced, the bereavement support payment (BSP) wr ll replace the current bereavement allowance, bereavement payment and wrdowed parent's allowance for bereaved people who lose therr spouse or c1vrl partner.Once rn payment, BSP Will be exempt from 1ncome tax.
Miscellaneous Loss Relief for Income Tax
Ant1-avo rdance legrslat1on w1ll deny a person miscellaneous loss relref for 1ncome tax purposes where a loss anses as a result of tax avo1dance arrangements. The leg1slat1on wrll also deny miscellaneous loss relief agarnst mrscellaneous rncome that anses as a result of tax avordance arrangements. Thrs rs effectrve for losses and rncome ansrng on and after 3 December 2014.
In addrtron, for 2015/16 onwards, the offset of a miscellaneous loss w1ll be limited to mrscellaneous rncome that rs chargeable to rncome tax under, or by vrrtue of, the same prov1s1on as that under wh1ch the loss would have been chargeable had rt been profits or other rncome rnstead of a loss.
Bad Debt Relief on Peer-to-peer Lending
lndrvrduals who make loans through peer-to-peer (P2P) platforms wrll be able to offset bad debts arrsrng agarnst the interest they recerve from P2P loans when calculatrng therr taxable rncome.These changes wrll have effect for loans made from 6 Aprrl2015, but the legrslatron wrll berna future Frnance Brll.
Abolition of the £8,500 Threshold for Benefits in Kind
The £8,500 earn1ngs threshold that determrnes whether employees pay 1ncome tax on all of therr benefits 1n krnd and expenses, and whether employers pay Class 1A Natrona! Insurance contributrons (NICs), rs to be abolished for 2016/17 onwards.
Currently, an employee rn so-called lower-pard employment (I.e. whose earnr ngs for the tax year are less than £8,500) pays tax only on certain employee benefrts, e.g. liVIngaccommodatron, vouchers and credrt-tokens. The abolitron of the threshold wrll mean all employees wrll be taxed on therr benefits and expenses rn the same way. The employer's NICs treatment wrll follow the rncome tax treatment.
New exemptrons wrll be rntroduced to cover benefits for m1nrsters of relrgron earnrng less than £8,500 and for employees who are carers; the latter wrll cover board and lodg1ng on a reasonable scale that rs provrded rn the home of the person beingcared for
Statutory Exemption for Trivial Benefits in Kind
A statutory exemptron rs to be rntroduced for 2015/16 onwards that wrll allow employers to rdentrfy and treat certarn low value benefits provrded to employees or former employees as triVIal. These benefits wrll then be exempt from rncome tax and Class 1A Natronallnsurance contnbut1ons and wrll not need to be reported to HMRC. A benefit wrll be tnvral rf rt meets all the follow1ng condrt1ons:
the benefit rs not cash or a cash voucher;
the cost of provrdrng rt does not exceed £50;
the benefit rs not provrded under salary sacnfice arrangements or any other contractual obligatron; and
1t IS not prov1ded 1n recogn1t1on of particular serv1ces performed, or to be performed, by the employee.
An annual cap of £300 w1ll be Introduced for office holders of close compan1es (broadly those controlled by 5 or fewer people) and employees who are fam1ly members of those office holders.Those affected by th1s cap will be able to rece1vea max1mum of £300 worth of exempt tnv1al benefits each year.
The current system whereby an employer can apply to HMRC for a d1spensat1on to pay expenses free of tax 1ncertain Circumstances w1ll be scrapped for 2016/17 onwards. Instead, expenses prov1ded to employees w1ll automatically be exempt 1n any case where the employee would have been eligible for a deduct1on had he Incurred and pa1d the equ1valent expense h1mself. The exempt1on will also allow the employee to be pa1d a scale rate rather than be rembursed the actual expense he has 1ncurred.Th1s can e1ther bea rate set by HMRC or a rate that the employer has agreed with HMRC. The exempt1on w1ll also apply to benefits 1n k1nd prov1ded by employers 1n respect of expenses 1ncurred by the1r employees It w1ll not apply to expenses/benefits prov1ded as part of a salary sacnfice arrangement or 1n conjunction with other arrangements that seek to replace salary With expenses. Similar rules will apply for NIC purposes.
Collection of Tax on Benefits and Expenses through Voluntary Payrolling
Leg1slat1on IS to be Introduced to allow HMRC to make changes to the PAYE Regulations to prov1de for voluntary payrolhng of certa1n benefits 1n k1nd.The Intention is that employers w1ll be able to opt to payroll benefits for cars, car fuel, medical1nsurance and gym membership for 2016/17 onwards.Where employers do so,they w1ll not have to make a return on Form P11D for these benef1ts.Instead, they w1ll report the value of the benefits through Real Time Information, and that value w1ll count as PAYE 1ncome hable to deduct1on us1ng the PAYE Tax Tables. The amended Regulations w1lldeterm1ne the value to be placed on the benefit for th1s purpose.
Van Benefit Charge for Zero Emission Vans
The van benefit charge for zero em1ss1on vans w1ll1ncrease from £n1l,beg.nn1ng1n 2015/16. The van benefit charge for
such vans w1ll be20% of the van benefit charge for vans wh1ch em1t C0 1n 2015/16,40% 1n 2016/17, 60% 1n 2017/18, 80%
1n 2018/19 and 90% 1n2019/20. From 2020/21, the van benefit charge for zero em1ss10n vans w1ll be the same as the van
benefrt charge for vans whiCh em1t C02.
Company Car Tax Rates and Bands for 2017/18 and 2018/19
Rates and bands for 2017/18
For cars w1th C0 em•ss1ons there will be a 9% band for em1ssions of Og-50g C0 per km,a 13% bandfor emss1ons of
51g-75g C02 per km, a 17% band for other low em•ss1on cars (76g-94g C02 per km); and a 1% 1ncrease for each nse 1n emissions of 5gC0 per kg from 95g C0 (18%) to the ex1st1ng max1mum of37%.
For cars Without a C02 emissions figure the appropnate percentage for a cylinder capacity of up to 1,400cc will be 18%;for 1,401-2,000cc 1t w1ll be 29%; and for 2,000cc plus 1t w•ll rema1n at 37%.
For cars first reg1stered before 1January 1998 the appropnate percentage for capac1ty up to 1,400cc will be 18%;for
1,401-2,000cc 1t w1ll be 29%;and for more than 2,000cc 1t Will rema1n at37%.
Rates and bands for 2018/19
For cars w1th C0 emiSSions there willbe a 13% band for em1ss1ons of Og-50g C0 per km,a 16% band for em1ss1ons
per km, a 19% bandfor em1ss1ons of76g-94gC0
per km;and a 1% 1ncrease for each rise of5gC0
per km from 95gC0 (20%) to the ex1st1ng max1mum of 37%.
For cars Without a C0 emiSSions figure,the appropnate percentage for a cylinder capac1ty of up to 1,400cc w1ll be
20%;for1,401-2,000cc 1twill be 31%;and for more than 2,000cc 1t w1ll rema1n at37%.
For cars frrst regrstered before 1January 1998 the appropnate percentage for capacrty of up to 1,400cc will be 20%; for 1,401-2,000 cc rt wrll be 31%; and for more than 2,000cc rt wrll remarn at 37%.
The Government rs concerned at the growrng use of overarchrng contracts of employment that allow some temporary workers and their employers to benefit from tax relref for home-to-work travel expenses, rehef not generally avarlable to other workers. The rules wrll be changed to restnct travel and subsrstence rehef for workers engaged through an employment rntermedrary, such as an umbrella company or a personal servrce company, and under the supervrsron, drrectron and control of the end-user.Thrs wr ll take effect from 6 Apnl 2016 followrng consultatron on the detarl.
Exemption from Income Tax and National Insurance Contributions (NICs): Lump Sums provided under Armed Forces Early Departure Scheme
Lump sum payments made to quahfyrngarmed forces personnel under the exrsting Early Departure Payment (EDP) 2005 scheme are exempt from rncome tax and are drsregarded for NICs purposes.The scheme wrll be replaced by the EDP2015 scheme on1Aprrl2015 .Legrslatron wrll berntroduced rn Frnance Brll2015 to ensure that the tax and NICs treatment of lump sum payments under the new schemers the same as those under the exrstrng scheme.
National Insurance Contributions
NICs for the Self-Employed
Class 2contrrbutrons wrll beabolished rn the next Parliament. Class 4 contrrbut rons wrll be reformed to rntroduce a new contrrbutory benefit test. The Government rntends to consult on the proposals later rn 2015.
The perrod over whrch self-employed farmers can average therr profrts for rncome tax purposes rs to be rncreased from 2 to 5years wrth effect from 6Apnl2016.
Simplified Expenses: Partnerships
The government wrll amend the simplified expenses regime introduced rn FA 2013 to ensure that partnershrps can
fully access the provrsrons in respect of the use of a home and where busrness premrses are also a home.
Tax Relief for Businesses Contributing to a Partnership Funding Flood Defence Scheme Finance Brll2015 wrllrntroduce legrslatron to allow a specrfic rncome tax or corporatron tax deductron from busrness profits or property busrness profits for contrrbutrons made on or after 1 January 2015 to partnershrp fundrng schemes for flood defence proJects (known as Flood and Coastal Erosion Rrsk Management (FCERM) projects).
No deductron wrll be allowed rf the contnbutor,or a person connected wrth hrm, recerves,or rs entrtled to recerve,
a drsqualrfyrng benefit.
Extension of Enhanced Capital Allowances for Zero-Emission Goods Vehicles to 2018 Legrslatron will be rntroduced rn Finance Brll 2015 to extend the availabrlity of 100% enhanced caprtal allowances (ECAs) for zero-emrssron goods vehrcles to 31 March 2018 for corporatron tax purposes and to 5 April 2018 for
rncome tax purposes. Inadditron a rule wrll be rntroduced preventrngclarms to the ECA berng made rf another form
of State ard has been, or wrll be,recerved,rn order to bnngthe relref rnto hne wrth other State ards.
Capital Allowances: Anti-Avoidance Rules for Plant and Machinery
Wtth effect from 26 February 2015 a further restnctton wtll apply to the amount of quahfytng expenditure on which capttal allowances may be clatmed on an ttem of plant and machtnery as a result of a connected party transact ton, a sale and leaseback, a transfer and long fundtng leaseback, or a transfer and subsequent hire-purchase.The new restriction w1ll apply tn certatn ctrcumstances where the person dtspostng of the asset does not bnng a disposal value tnto account. When the restnct1on applies the person acqu1nng the asset wtll be treated,for the purposes of plant and mach1nery allowances,as havtng no quahfy1ng expenditure.
Diverted Profits Tax
The dtverted profits tax w1ll apply to dtverted proftts anstng on or after 1Apnl 2015, wtth apport tonment rules for accounttng penods that straddle that date. The tax does not apply where, broadly, the parttes to the relevant transacttons are small and medtum stzed enterprises. It IS a tax that IS atmed at large multtnattonal groups of compan1es and IS tntended to deter the tmplementatton of aggresstve tax planntng whtch seeks to dtvert profits away from the UK,1n order to m1nim1se the group's overall corporation tax bill.
The diverted profits tax effectively operates by applying a 25% tax charge on diverted profits relattng to UK act1v1ty and appltes to compantes that:
des1gn thetr act1vtttes to avotd creattng a taxable presence (a permanent establishment) 1n the UK;or
create a tax advantage by us1ngtransactions or ent1t1es that lack economtc substance.Note thts rule also applies where a non-UK restdent company ('the fore1gn company') trades through a UK permanent establishment.
The tntttal onus to nottfy l1ab11ity falls on the relevant company.
Film Tax Relief
Subject to State atd clearance, the Government wtll tncrease the rate of film tax relief to 25% for all quahfy1ng expendtture. Thts wt ll apply from 1Apnl2015 or, 1f later,the date of approval by the European Commtss1on .
High-end Television Tax Relief
Wt th effect for qualtfytng expenditure 1ncurred on and after 1 Apnl 2015, subJect to State atd clearance, the mtnimum UK expenditure requirement for televtston tax relief w1ll be reduced from 25% to 10% for compantes w1th1n the charge to corporat1on tax that are d1rectly tnvolved 1n the product1on of h1gh-end telev1ston or an1mat 1on. The cultural test wtll be moderntsed.
Children's Television Tax Relief
The ex1st1ng televtston tax rel1efs for an1mat1on and htgh-end TV are extended to children's televts1on programmes, 1nclud1ng chtldren's game shows and compet1t1ons. Compantes w1th1n the charge to corporation tax that are directly tnvolved 1n the productton of children's televts1on programmes wtll be able to clatm a deduct ton from the1r prof1ts at the rate of 25% on quahfytng expendtture tncurred on ehg1ble programmes on and after 1Apnl2015. Where that addtttonal deduction results tn a loss, the company may surrender the loss for a payable tax credit. Both the addittonal deductton and the payable credtt are calculated on the basts of a maxtmum of 80% of the total UK core expenditure by the quahfytng company. The addtttonal deductton ts 100% of qualify1ng core expenditure and the payable tax credtt IS 25% of losses surrendered .
Children's programmtng w1ll not be subject to the £1m per programme hour threshold or the 30 m1nute slot length that apply to h1gh-end TV programmes.
Orchestra Tax Relief
Leg1slat1on w1ll be Introduced 1n a future Finance Bill for a new relief for orchestras at a rate of 25% on qualifying expenditure from 1Apnl2016.
Accelerated Payments and Group Relief
The Government w1ll1ntroduce leg1slat1on to ensure that the accelerated payments leg1slat1on works effectively where avo1dance arrangements g1ve nse to losses surrendered as group relief It w1ll be applicable to all cases 1nvolv1nggroup rel1ef where there IS an open enqu1ry or open appeal on or after the day of Royal Assent to F1nance Act 2015. Where a company makes a return assert1ng a tax advantage from chosen arrangements, and then surrenders all or part of that advantage as group relief. the leg1slat1on w1ll allow HMRC to 1ssue an accelerated payment notice to the effect that the asserted advantage may not besurrendered wh1le the dispute IS in progress.
Modernisation of Corporate Debt and Derivative Contracts
A senes of Wide-ranging changes have been announced to update, s1mphfy and rationalise the leg1slat1on on corporate debt and denvative contracts.
The ma1n changes will be:
The relat1onsh1p between accountancy and tax w1ll be clanf1ed and strengthened. In part1cular, the requirement
that amounts brought 1ntoaccount for tax must 'fa1rly represent'the prof1ts,ga1ns and losses ans1ng w1ll beremoved.
The calculation of taxable amounts w1ll be amended to bnng them 1nto line w1th the usual approach to the computation of profits Taxat1on will be based only on amounts recogn1sed as 1tems of accounting profit or loss, rather than on amounts recogn1sed anywhere 1n accounts- 1nreserves or equ1ty,for example. A trans1t1onal rule Will ensure that th1s change IS broadly tax neutral.
Taxable amounts that would otherwise anse where arrangements are made to restructure the debts of acompany 1n financ1al d1stress w1th a v1ew to ensunng 1ts cont1nued solvency will be excluded. Th1s will cover s1tuat1ons where debt IS released,or where the terms are modified, supplementing and extend1ng the ex1st1ng rule that exempts credits ansing 1n debtor compan1es when creditors exchange debt Investment for an equ1ty stake.
A new reg1me-w1de ant1-avo1dance rule will counter arrangements entered 1ntow1th a ma1n purpose of obta1n1ng a tax advantage by way of the loan relat1onsh1ps or denvat1ve contracts rules. As a consequence ,a number of ex1stingspecificant1-avo1dance rules will be repealed.
The first two changes will apply for account1ng penods commenc1ng on or after 1 January 2016. The latter two apply, respectively,to releases and mod1f1cat1ons onor after 1 January 2015 and arrangements entered 1nto on or after 1Apnl2015. The Government has announced that these changes w1ll be leg1slated for 1n a future Finance 8111.
Research and Development
Leg1slat1on w1ll be Introduced to restnct qualifying expenditure for research and development (R&D) tax cred1ts so that the cost of consumable 1tems Incorporated 1n products that are sold in the normal course of a company's business are not elig1ble for R&D relief. with effect from 1Apnl2015. Qualifying expenditure on consumable 1tems w1ll be lim1ted to the cost of only those 1tems fully used up or expended by the R&D act1v1ty 1tself wh1ch do not go on to be sold as part of a commerc1al product. Th1s restnct1on w1ll not apply where the product of the R&D IS transferred as waste, or where 1t 1s transferred but no cons1derat1on 1s g1ven.
In add1t1on, from 1Apnl2015,the rate of the above the l1ne credit for large compames w1ll1ncrease from 10% to 11% and the rate of the relief for the SME scheme w111 1ncrease from 225% to 230%.
Leg1slat1on will be Introduced to repeal all requirements relat1ng to the locat1on of a 'link company' for consortium cla1ms to group relief Th1s w1ll apply to all cla1ms to group relief for account1ng penods beg1nn1ng on and after 10
December 2014. Pnor to thts amendment the hnk company had to be 1n the UK or EEA. Thts measure makes the tax system Simpler by remov1ng differences 1n treatment of ltnk compantes based 1n the UK and other JUnsdtCtlons .
Goodwill Transfers on Incorporation
Corporation tax reltef w1ll berestncted where acompany acqu1res Internally-generated goodw1ll andcustomer-related tntangtble assets from related 1nd1v1duals on the 1ncorporat1on of a bus1ness on or after 3 December 2014,unless the transfer IS made pursuant to an uncond1t1onal obhgat1on entered 1nto before that date.Currently compan1es are g1ven corporation tax relief on Internally-generated goodwill even when there IS cont1nu1ng econom1c ownership.Thts change w1ll ensure that businesses that do not Incorporate are not at a disadvantage compared to those wh1ch do.
Compan1es already rece1v1ng relief for goodw1ll recogn1sed on 1ncorporat1on wtll not be affected.
Corporate Loss Refresh Prevention
From 18 March 2015 there are restncttons to prevent compantes convert t ngbrought forward trad1ng losses, non trading loan relat1onsh1p defictts and management expenses tnto 1n-year deductions. Where a company enters 1nto an arrangement, the mat n purpose of wh1ch IS to utthse the brought forward losses,1t w1ll be unable to use the brought forward losses aga1nst profits created as a result of the arrangement.
Deduction at Source from Interest Paid on Private Placements
AUKcompany'sdutytodeduct lncometaxfromcertatnpaymentsofyearlyinterestwillnotapplytoapaymen toflntereston quahfytng pnvate placements andthe condition relat1ng to the mintmum term of thesecunty Will be removed.The pnmary leg1slat1on for thts measure will haveeffect on or after the date of Royal Assent to Finance Act 2015 and regulattons wtll set out detailed condittons of private placements that qualify for the exemption. These regulattons mayallow the exempt1on to be targeted at particular types of company, and may contatn safeguards to ensure the exemptton IS not abused.
Legtslatton w1ll beIntroduced tn Ftnance 81112015 thatg1ves the UK the power to Implement the OECD model for country by-country reporttng.The new rules wtll requ1re multt-nattonal enterpnses (MNEs) wtth a parent company 1n the UK to make an annual country-by-country report to HMRC show1ng, for each taxjunsdictton 1nwh1ch they do bus1ness:
the amount of revenue, profit before income tax and income tax paid and accrued; and the1r total employment, capital, reta1ned earnings and tangible assets.
Regulations g1v1ng effect to the scope and detail of the reporttngobl1gat1on w1ll be made at a later date.
Late Paid Interest
As part of the revtew of the legislation on corporate debt announced at Budget 2013,the Government w1ll repeal rules concerntng loans made to UK companres by a connected company 1n a non-qual1fy1ng terntory.
Bank Levy Rate Increase
Leg1slat1on 1n F1nance 81112015 w1111ncrease the rate of the bank levy to 0.21% from 1 Apn l 2015.A proportionate
tncrease to 0.105% w1ll be made to the half rate from the same date.
Capital Gains Tax
Non-UK Residents and UK Residential Property
Capital ga1ns tax Will be charged on ga1ns accrutng to non-UK res1dent persons on disposals of UK res1dent1al property made on or after 6Apnl2015.Th1s w1ll affect:
non-UK restdent tndtvtduals; non-UK restdent trusts;
personal representatives of a deceased person who was non-UK restdent; and
non-UK restdent compantes controlled by ftve or fewer persons, except where the company 1tself,or at least one
of the controlling persons, is a 'qualtfy1ng 1nstitut1onaltnvestor '.
ItWill also affect some UK res1dent tnd1v1duals d1spos1ng of propert1es overseas or who spend part of a tax year abroad. Tax will be due for payment w1th1n 30 days of the property be1ng conveyed, unless the person has a current self
assessment record w1th HMRC,when payment w1ll be at the normal due date for the tax year 1n whtch the dtsposal
In add1t1on, pnvate res1dence reltef (PRR) w1ll be restncted where a property IS located 1n a JUnsdtctton 1n whtch a taxpayer IS not resident. In these circumstances, the property w1ll only be capable of betng regarded as the person's main res1dence for PRR purposes for a tax year where the person meets a 90-day test for t1me spent 1n the property over the year.
Entrepreneurs' Relief on Deferred Gains
Ftnance Act 2015 w1ll allow ga1ns that are eltgtble for entrepreneurs' relief (ER), but wh1ch are tnstead deferred tnto tnvestments that qualify for the Enterpnse Investment Scheme (EIS) or Social Investment Tax Relief (SITR), to rema1n el1g1ble for ER when the ga1n IS realtsed. Th1s w1ll benefit qualtfytng ga1ns on d1sposa ls that would be el1g1ble for ER but are deferred into EIS or SITR on or after 3 December 2014.
Entrepreneurs' Relief for Disposals of Goodwill
Leg1slat1on tn F1nance 8111 2015 wtll prevent entrepreneurs' relief from be1ng ava1lable on d1sposals of goodwtll on or after 3 December 2014 to a close ltmtted company to whtch the seller IS related. The reltef may sttll be cla1med by partners in a firm who do not hold or acqu1re any stake tn the successor company.
Restricting Entrepreneurs' Relief on Associated Disposals
The rules relating to entrepreneurs' rehef on assoctated disposals are to be amended. For d1sposals on or after 18 March 2015, tn order to qualrfy for the reltef on a d1sposal of a pnvately-owned asset the datmant must reduce h1s part1c1pat1on tn the bus1ness by also d1spos1ng of a m1ntmum 5% of the shares of the company carrytng on the business, or (where the bus1ness IScarried on tn partnership) of a m1n1mum 5% share tn the assets of the partnersh1pcarry1ng on the bus1ness.
Entrepreneurs' Relief, Joint Ventures and Partnerships
Legtslatton IS to be Introduced to ensure that those who beneftt from entrepreneurs' relief have a 5% d1rectly-held shareholding tn agenutne tradtng company. For diSposals on or after 18 March 2015, the defin1t1ons of a 'tradtngcompany' and 'the hold1ngcompany of a tradtnggroup' do not take account of actiVIties earned on byJOint venture compantes whtch a company ISInvested tn, or of partnershipS of wh1ch a company ISa member.Therefore a company would need to have a stgnrficant trade of rts own 1n order to beconsidered as atradingcompany.
Exemption for Certain Wasting Assets
Leg1slat1on will be introduced to make it clear that the capttal gains tax wast1ng asset exempt1on applies only 1f the person selling the asset has used 1t as plant 1n the1r own bus1ness as opposed to 1ts bet ng used as plant tn another person's bus1ness. Thts change wtll have effect for gatns accru1ng on and after 1 Apr il 2015 for corporatton tax purposes and 6 Apnl2015 for CGT purposes.
Threshold amount for ATED-related Capital Gains Tax
Leg1slat1on will be Introduced 1n Finance Btll 2015 to reduce the threshold amount for cons1derat1on received on a d1sposal of res1dent1al property, above wh1ch an Annual Tax on Enveloped Dwelhngs (ATED)-related ga1n may
accrue.The threshold w1ll fall from £2m to £1m for d1sposals on or after 6 Apnl 2015, and then to £500,000 for
disposals on or after 6 Apnl2016.
Savings and Investments
Personal Savings Allowance
It IS proposed that a new Personal Sav1ngs Allowance be Introduced from 6 Apnl2016. For a bas1c rate taxpayer, th1s Will exempt from 1ncome tax the first £1,000 of sav1ngs 1ncome,such as bank and bu1ld1ngsoc1ety Interest. For a h1gher rate taxpayer,only the first £500 w1ll be exempted The PersonalSav1ngs Allowance will not be ava1lable to add1t1onal rate taxpayers .At the same t1me, the deduct1on of bas1c rate tax at source from Interest pa1d by banks and bu1ld1ng soc1et1es w1ll be abol1shed for all savers.
Individual Savings Accounts (ISAs)
ItIS announced that regulat1ons w1ll be Introduced 1n Autumn 2015 to enable a cash ISA Investor to Withdraw money from h1s ISA and pay 1t back 1n aga1n during the same tax year Without the second transaction count1ng towards h1s ISA subscnpt1on limit for that year.Regulations w1ll also be Introduced to extend the l1st of quallfy1ng Investments for ISAs and Ch1ld Trust Funds.
Help to Buy ISAs
Th1s proposed scheme for first-t1me home buyers willprov1de a bonus to each person who has saved 1nto a Help to Buy lnd1v1dual Sav1ngs Account. The bonus will be pa1d at the t1me the sav1ngs are used to purchase a home. For every £200 saved,the Government will prov1de a £50 bonus up to a maximum of £3,000 on £12,000 of sav1ngs. Accounts are expected to be ava1lable through banks and bu1ld1ng soc1et1es from Autumn 2015. Savers w1ll be able to make an 1n1tial depos1t of £1,000 and a monthly sav1ng of up to £200.The bonus will be available on home purchases of up to £450,000 1n London and up to £250,000 elsewhere 1n the UK.
Special Purpose Share Schemes
Compa mes somet1mes use spec1al purpose share schemes (often called 'Bshare schemes') to offer shareholders the opt1on to rece1ve, 1nstead of a d1v1dend, a Similar amount v1a an 1ssue of new shares.The shares 1ssued are subsequent ly purchased by the company or are sold to a pre-arranged th1rd party. Under leg1slat1on to be Introduced, any amount thus rece1ved by a shareholder after 5 Apnl2015 w1l l be charged to 1ncome tax by treating it as a d1stnbut1on, 1.e.a d1v1dend, made to the shareholder by the company 1n the tax year inwh1ch 1t IS rece1ved ItWill qualify for a d1v1dend tax cred1t to the same extent that an actual dlstnbut1on by the company to the shareholder would have qualified.
The above w1ll apply whenever a company has g1ven a shareholder the option to rece1ve, 1nstead of a d1v1dend, someth1ng that would not be subject to 1ncome tax, and the shareholder has taken that opt1on.lf at any t1me a tax other than 1ncome tax (e.g.cap1tal ga1ns tax) IS charged 1n relat1on to the rece1pt,then 1n order to avo1d a double charge to tax, the rec1pient may make a claim for consequential adJustments to be made 1n respect of the other tax.
Social Investment Tax Relief- Enlarging the Scheme
Subject to EUState a1d clearance, the max1mum amountthat can be Invested through SocialInvestment Tax Rehef w1ll be 1ncreased,and the range of qual1fy1ng soc1al enterpnses broadened to 1ncludecerta1n small horticulture and agriculture proJects that willno longer quahfy for subsidy as a result of the for thcomingCommon Agncultural Polley reforms.The range of eligible soc1al1mpact bonds (SIBs) w1ll also be Widened to 1nclude certa1n spot purchased and sub-contracted SIBs.
There w1ll be a consultation on allow1ng Investments to be made 1nd1rectly,through a soc1al 1nvestment form of a venture cap1taltrust scheme, a 'Soc1al VCT'.
Social Venture Capital Trusts
The Government wrlllegrslate for Sacral Venture Caprtal Trusts (VCTs) rna future Frnance Bill.The rate of rncome tax relief for rnvestment rn Sacral VCTs wrll be set at 30%, subject to State ard clearance. Investors wrll pay no tax on drvrdends recerved from a Sacral VCT or caprtal garns tax on disposals of shares rna Sacral VCT. Sacral VCTs wr ll have the same excluded actrvitres as the SacralInvestment Tax Rehef Scheme.
Changes to Venture Capital Schemes for Companies and Community Organisations Benefiting from Energy Subsidies
From6Apnl2015,companres and communrty organrsatrons wrll cease to be ehgrblefor the Seed Enterpnse Investment Scheme (SEIS), Enterpnse Investment Scheme (EIS) and Venture Caprtal Trust (VCT) Scheme where their actrvrttes consrst wholly or substantrally of the subsrdrsed generatiOn or export of electncrty, or the substdised generatron of heat or productron of gas or fuel, and:
the activrtres are carried out by communrty groups; or
where anaerobic digestron or hydroelectnc power is rnvolved; or
the company has entered rntoa Contract for Drfference under the Energy Act 2013.
For Sacral Investment Tax Rehef (SITR), actrvities that are substdrsed by way of Feed-in Tanffs wrll cease to be excluded actrvrtres followrngState a1d clearance of the scheme. As a transrt1onal measure. the prov1srons excluding communrty energy organ1satrons from EIS, SEIS and VCT wrll take effect srx months after approval for the extensron ofSITR.
SEIS, EIS and VCT changes
It rs rntended that the Enterpnse Investment Scheme, Seed Enterpnse Investment Scheme and Venture Cap1tal Trust Scheme w1ll be amended, subject to State a1d approva l,so that:
companies must be less than 12years old when recervrng the1r frrst EISor VCT rnvestment, unless that rnvestment wrlllead to a substantral change 1n actrvrty;
a cap for all schemes wrll be rntroduced of £15m,rncreasrng to £20m for knowledge-1n tensrve companres; and
there wrll be an rncrease rn the employee lrmrt for knowledge-rntens 1ve compan1es from 249 to 499.
With effect from 6 Apnl 2015, the requrrement that 70% of SEIS money must be spent before EIS or VCT fundrng can be rarsed wrll be removed.
Relevant Property Trusts
Following the Government's consultatron on proposals for changes to the rnhentance tax regrme for relevant property trusts,a number of measures are to be rncluded rna future Finance Brll:
Incalculating the rateof rnhentance tax for thepurposesof theten-yea r charge and theexrt charge,the requrrement to 1ncludecertarn property that rs not relevant property rs removed for charges ansrng on or after 6 April2015.
A new rule rs Introduced, subject to trans1tronal provrsions, for ten-year annrversary charges. ex1t charges and charges on 18/25 trusts ansrng on or after 6 Apnl2015.Where property of more than £5,000 rs added to two or more relevant property settlements on the same day (and after the commencement of those settlements), then,rn calculatrng the rate of tax for any of those settlements, the value of the property so added to the other settlements, together wrth the value of property added to those settlements at the date of therr commencement, must be brought rnto account tn calculatrng the rate of tax.
The requrrement that a clarmfor condrtronal exemptron must be made and the property desrgnated as hentage property before the ten-year charge rs removed so that, for ten-year charges that would otherwrse anse on or after the date of RoyalAssent to the Frnance Act rn whrch the legrslatron rs rncluded, the clarm for desrgnatron can be made wrthrn the two years followrng the date of the ten-year annrversary.
The rules applyrng to settlements made before 22 March 2006 that grve an rnterest rn possessron to the settlor or therr spouse or crvrl partner (or survrvrngspouse or crvil partner) are amended.Where, on or after the day after the date of Royal Assent to the Frnance Act rnwhrch the legrslatron rs rncluded, one party to the couple succeeds to the rnterest rn possessron of the other, the settled property wrll then come wrthrn the relevant property trusts regrme unless the successor's rnterest rs an rmmedrate post-death rnterest, a drsabled person's rnterest or a transitronal senalrnterest.
For deaths on or after 10 December 2014, where property rs left rna relevant property trust and an apporntment rs made of that property to the spouse or crvrl partner of the testator, that apporntment rs read back rnto the wrll and exemptron from rnhentance tax can apply even where the apporntment rs made rn the three months followrng death.
Exemption for Emergency Service Personnel and Humanitarian Aid Workers
Effectrve for deaths on or after 19 March 2014, IHT wrll not be charged on the estates of emergency servrce personneland humanrtanan ard workers whose death has been caused drrectly or hastened by rnJury or r llness whrle responding to emergency circumstances. The Government has clanfied that the exemptron applies to servrng and former police officers and servrce personnel targeted because of therr status.
Extending Exemption for Medals and Other Awards
The exclusron from rnhentance tax that applies to medals and other decoratrons that are awarded for valour and gallantry rs extended to alldecoratrons and medals awarded by the Crown or by another country or terntory outsrde the UK to the armed forces, emergency servrce personnel and to rndtvrduals rn recognrtron of therr achrevements and service rn pubhc life.The extensron is effectrve rn relation to transfers of value made or treated as made on or after 3 December 2014.
Interest Changes to Support the New Digital Service
Legrslatron wrll be introduced rn a future Finance Brll to provrde for a new inhentance tax online servrce. Draft regulatrons to facrlitate the use of electronrc communrcatrons wrll be published shortly after the Budget. It was announced at Autumn Statement that future regulatrons would also update the rnstalment interest provrsrons relatrng to certarn financralrnstrtutrons and companres, and clanfy the penod from when rnterest rs charged. The amendments wrll come rnto force on an appornted day to be specrfred rn regulatrons. This rs expected to be at the same trme as the new online servrce becomes avarlable.
Gift Aid Intermediaries
A non-chanty rntermedrary wrll be able to submrt a grft ard declaratron on behalf of a donor,and the recrprent chanty able to clarm grft ard on the basts of such a declaratron. Primary legrslatron wrll be effectrve from Royal Assent to Frnance Act 2015 wrth further details governrng the declaratrons rntroduced rn later regulatrons.
Gift Aid Small Donations Scheme
From 6 Apnl2016 the maxrmum annual donation amount that can be clarmed by a chanty under the Gift Ard Small Donatrons Scheme wrll be rncreased to £8,000, thus enabling the chanty to clarm a Grft Ard style top-up payment from HMRC of upto £2,000.
Status of Certain Bodies for Tax Purposes
The Commonwealth War Graves CommiSSIOn (CWGC) and the lmpenal War Graves Endowment Fund (which prov1des Investment 1ncome for the CWGC) will be treated as chant1es for tax purposes from the date of Royal Assent to F1nance Act 2015.
Reduction in Lifetime Allowance
It IS Intended to Introduce leg1slat1on 1n the next Parliament to reduce the pens1on lifet1me allowance from 6 Apnl 2016 from £1.25m to £1m, accompa n1ed by f1xed and 1nd1V1dual protection arrangements .From2018 the allowance will nse 1n line w1th the consumer prices 1ndex.
It is intended to Introduce legislation 1n a future Finance Bill,to be effective from Apnl2016,to allow those already 1n rece1pt of an annu1ty to sell to a th1rd party and take the proceeds d1rectly or draw them down over a number of years. Income tax would be at the 1nd1V1dual's marg1nal rate.
Taxation of Inherited Annuities
From 6 Apnl2015, benefic1anes of 1nd1v1duals who d1e under the age of 75 w1th a JOint hfe or guaranteed term annuity w1l l be able to rece1ve any future payments from such pohc1es tax-free where no payments have been made to the beneficiary before 6 Apnl 2015. The tax rules will also be changed to allowJOint hfe annu1t 1es to be pa1d to any beneficiary. Where the 1nd1v1dua l was over 75, the beneficiary will pay the1r marginal rate of 1ncome tax.
Disclosure of Tax Avoidance Schemes Regime Changes
The disclosure of tax avo1dance schemes (DOTAS) regme IS amended to:
ensure disclosure 1s made by persons resident 1nthe UK where a promoter not res1dent 1n the UK fails to disclose; change the 1nformat1on that must be prov1ded to HMRC;
enable HMRC to publish 1nformat1on about promoters and disclosed schemes; and
establish a taskforce to enforce the strengthened reg1me.
Changes to pnmary leg1slat1on 1ncluded in the Finance Bill come 1ntoforce on the date of RoyalAssent,and further amendments w1ll be made through secondary legislation and will come 1nto force at a later date.The changes will be extended to schemes avo1d1ng Nat1onallnsurance contnbut1ons.
Promoters of Tax Avoidance Schemes
The follow1ng changes w1ll be made 1n a future F1nance 8111 to the leg1slat1on that affects h1gh-nsk promoters of avo1dance schemes:
HMRC w1ll be able to 1ssue conduct not1ces to a broader range of connected persons;
the t1me lim1t for 1sSu1ng not1ces to promoters who have fa1led to d1sclose avo1dance schemes to HMRC under DOTAS IS amended;
a new threshold cond1t1on willbe Introduced for fa1hng to comply w1th NICs disclosure requirements;and
the threshold condit1ons w1ll take account of dec1S1ons by Independent bod1es 1n matters relat1ng to profeSSIOnal misconduct.
Leg1slat1on Will be Included 1n a future F1nance 8111 to Introduce tougher measures for those who persistently enter nto tax avo1dance schemes wh1ch fail. These will Include a spec1al report1ng requirement and a surcharge on any such senal avo1der whose latest tax return IS Inaccurate as a result of a further fa1led scheme.The Government w1ll look to restr1ct access to reliefs for senal avo1ders and to name and shame them.Leg1slat1on w1ll be Introduced 1n due course to w1den the scope of the current disclosure regme by 1nclud1ng promoters whose schemes regularly fa1l.
Leg1slat1on w1ll be Introduced 1n a future F1nance Bill that w1ll 1ncrease the deterrent effect of the General Anti
Abuse Rule (GAAR), by 1ntroduc1ng a spec1f1c, tax-geared penalty that applies to cases tackled by the GAAR.
Penalties for Offshore Non-compliance
The penalty for failure to notify chargeab1lity to 1ncome tax or cap1tal ga1ns tax, the late filing penalty for self assessment tax returns and the penalty for careless or deliberate errors 1n documents IS currently 1n each case Increased where the fa1lure 1nvolves an offshore matter.Th1s offshore penalty reg1me 1s to be strengthened and extended w1th effect from 1Apnl2016 so that 1t w1ll :
apply additionally to 1nhentance tax;
cover cases where the proceeds of domest1c non-compl1ance are Situated or held outs1de the UK;and
have four (1ncreased from three) levels of penalty, w1th the lowest level applying to countnes that adopt automatic exchange of 1nformat1on.
On and after the date of Royal Assent to Finance Act 2015 there Will be a new and additional penalty where: a person IS liable to one of the penaltieS ment1oned above;
that penalty IS for a deliberate fa1lure;
assets are moved from a spec1fied country to a non-spec1f1ed country; and
a ma1n purpose of the movement IS to prevent or delay the discovery by HMRC of the potent1alloss of revenue
g1v1ng nse to the sa1d penalty.
Countries will be specified for this purpose 1f they have comm1tted to exchang1ng 1nformat1on.
The follow1ng have been announced 1n relat1on to current disclosure facillt1es:
the disclosure penod of the L1echtenste1n D1sclosure Fac11ity Will beshortened,w1th the end date be1ngchanged from Apnl2016 to December 2015;and
the disclosure penod of the Crown Dependencies D1sclosure Fac11ity w1ll also be shortened,w1th the end date bengchanged from September 2016 to December 2015.
A new time-lim1ted d1sclosure fac1l1ty will be Introduced that will run after the ex1st1ng fac1lit1es close,w1th tougher terms than ex1st1ng fac11it1es,1nclud1ng penalt1es of at least 30% and no guarantee around cnm1nallnvest1gat1on.
Stamp and Property Taxes
Stamp Duty Land Tax:Extension of Multiple Dwellings Relief
The SDLT rel1ef for transactions 1nvolv1ngInterests 1nmore than one dwell1ng1s to beextended to 1nclude purchases from certa1n shared ownership bodies of supenor leasehold Interests 1n property subject to shared ownership leases where the transaction IS part of a lease and leaseback arrangement. The change will apply to transactions with an effect1ve date on or after the date of Royal Assent to F1nance Act 2015.
Stamp Duty Land Tax:Alternat ive Property Finance
A change IS to be made to the SDLT alternative property finance reliefs wh1ch apply where a property IS purchased us1ng a method of financ1ng wh1ch does not 1nvolve the payment of Interest. The rel1efs w1ll be extended to apply to all purchases wh1ch are financed us1ng a home purchase plan prov1ded by an authonsed prov1der. The change w1ll apply to transactions w1th an effective date on or after the date of Royal Assent to F1nance Act 2015.
Annual Tax on Enveloped Dwellings (ATED)
The 2015/16 ATED annual charges w1ll be as follows:
More than £1m but not more than £2m More than £2m but not more than £5m More than £5m but not more than £10m More than £10m but not more than £20m More than £20m
Annual charge 1n 2015/16
Reducing Administrative Burden of ATED
Leg1slat1on w1ll be Introduced 1n Finance B1ll 2015 to reduce the adm1n1strat1ve burden on bus1nesses wh1ch hold properties el1g1ble for a relief from ATED and for wh1ch there IS no tax l1ab11ity. For chargeable penods beg1nnrng on or after 1 Apnl 2015 such bus1nesses w1ll be able to submit a relief declarat1on return. A relief declarat ion return can only relate to one type of ATED rel1ef, but subject to th1s 1t can be made 1n respect of one or mores1ngle-dwelhng Interests,which do not need to be 1dent1fied.For the 2015/16 year only, relief declaration returns must be f1led by 1October 2015. For subsequent years the normal filing date of 30 Apnl will apply.
Value Added Tax
VAT Registration Thresholds
W1th effect from 1 Apnl 2015, the VAT reg1strat1on thresho ld w1ll be Increased from £81,000 to £82,000. The dereg1strat 1onthreshold w1ll be 1ncreased from £79,000 to £80,000 The reg1strat1on anddereg1stration thresholds for acqu1S1t1ons from other EU member states w1ll be Increased from £81,000 to £82,000.
VAT Deductions Relating to Foreign Branches
Followingthe CJEU dec1s1on 1n Credtt Lyonnats amendments to the VAT Regulations w1ll mean that:
calculations of recoverable 1nput tax us1ngthe partial exemption standard method must exclude supplies made by establishments outs1de the UK;
calculations of recoverable 1nput tax us1ng a part1al exemption spec1al method must exclude supplies made by establishments outs1de the UK;
the use-based calculation for 'out-of-country' supphes IS hm1ted to supplies made from establishments w1th1n
The changes w1ll have effect from the first day of a bus1ness's longer penod wh1ch commences on or after 1August 2015.
Power to Make Refunds to Named Bodies
Government departments are perm1tted to obta1n refunds of VAT wh1ch they 1ncur 1n relation to non-bus1ness activities. However, th1s does not extend to non-departmental public bod1es and s1m1lar arm's-length bod1es.
A future F1nanceAct will prov1de that the Treasury may, by order, name any such bod1es as 'spec1fied bod1es', w1th the result that they w1ll be able to recover the VAT wh1ch they 1ncur on non-bus1ness act1v1t1es. The a1m of the measure 1s to prevent VAT from be1ng a d1s1ncent1ve to cost-shanng arrangements between such bodies, wh1ch currently g1ve nse to Irrecoverable VAT.
Any hope of a w1ndfall by a spec1fied body will, however, be short lived; since the rec1p1ent w1ll be government funded, the extent of the funding w1ll be adJusted downwards to take account of the VAT wh1ch IS now recoverable .
Oil and Gas
Oil and Gas Companies
A package of measures has been announced to reform the oil and gas fiscal regime as follows:
from 1 January 2015, the rate of the supplementary charge payable 1n respect of profits from 011 and gas product1on 1n the UK or on the UK Continental Shelf IS reduced to 20%;
for chargeable penods end1ng after 31 December 2015 the rate of petroleum revenue tax payable 1n respect of profits from 011 andgas production IS reduced to 35%;
for quahfy1ng pre-commencement expenditure Incurred 1n account1ng penods end1ng on or after 5 December 2013, the nng-fence expenditure supplement IS extended from s1x to ten account1ng penods and the extended nngfence expenditure supplement 1s removed;
new allowances will be Introduced wh1ch w1ll remove an amount equal to 62.5% of nvestmentfcapltal expenditure 1ncurred by a company from 1ts adJusted nng-fence profits which are subJect to the supplementary charge.
Investment Managers:Disguised Fee Income
For 2015/16 onwards, where an 1ndiv1dual prov1des Investment management serv1ces for a collective Investment scheme through an arrangement involv1ng partnershipS, then any sum rece1ved for those serv1ces (the 'd1sgu1sed fee') will be treated as profits of a trade, unless already charged to 1ncome tax. Th1s w1ll have effect 1n relat1on to all d1sgu1sed fees ansing on or after 6 Apnl2015, whenever the arrangement 1s entered 1nto. Sums Will not be caught 1f they represent a return on Investments by the managers or a return wh1ch vanes by reference to profits on funds. An 1nd1v1dual thus charged w1ll be able to cla1m a consequential adJustment 1f at any t1me tax IS charged under another tax prov1s1on 1n respect of the same fee. The consequential adJustment cannot exceed the lesser of the two charges.