The first version of the Finance (No. 2) Bill 2017-19 was published on 1 December 2017. The majority of the Bill's content had been previously announced at the Autumn 2017 Budget (see further below), so there were no real surprises in terms of the measures included. It is expected that the Bill will proceed through Parliament and receive Royal Assent next year as the Finance Act 2018.

The key measures included in the Bill are:

  • Indexation allowance in relation to corporation tax on capital gains will be frozen from 1 January 2018 and no relief will be available for inflation after 1 January 2018.
  • The top rate of R&D expenditure credit will be increased from 11% to 12%.
  • An extension of HMRC's powers to hold online marketplaces jointly and severally liable for the unpaid VAT of UK and overseas traders on their platforms.
  • A new restriction on the availability of treaty relief in relation to tax incurred by an overseas permanent establishment (PE) of a company where the company has already received relief for the losses of the PE against profits other than those of the PE.
  • A number of amendments to the recently introduced interest deductibility restriction rules considered necessary for the regime to operate as intended, with some changes being deemed to have always had effect.
  • Amendments to the powers for giving effect in domestic law to international treaties to enable the implementation of the BEPS multilateral instrument.
  • New measures to counter disguised remuneration through the use of close companies.*
  • A withholding tax exemption for debt traded on a multilateral trading facility.*

*See September Tax Round Up for further information on these measures.

The Bill also includes provisions to clarify the taxation of partnerships, the initial draft of which was covered in our September Tax Round Up. Crucially, the Bill did not include provisions that sought to align the allocation of a partnership's profits or losses for tax purposes with the commercial allocation of profit between partners, which received a negative response for being unclear and difficult to apply. The remainder of the provisions broadly remain as previously drafted and it is possible that the missing provisions on profit allocation will be introduced before the Bill is finalised. No reason was given for why these provisions were not included.