Tax changes in legislative leapfrog by Donald Drysdale

Originally written for ICAS by Donald Drysdale, winner of Tolley’s Tax Commentator of the Year 2017 and contributor to various Bloomsbury Professional titles.  

18 September 2017

Main points

  • The Finance (No 2) Bill 2017 has been published, bringing forward proposals dropped when the general election was called for 8 June.
  • The Bill may not receive Royal Assent until after the next Budget.
  •   In the meantime, draft clauses for the Finance Bill 2018 have already been published.

Taxpayers and practitioners face many tax changes, and Donald Drysdale finds that these are coming forward in an unexpected order.


The new Finance Bill

On 8 September the autumn Finance Bill was published, together with explanatory notes. Officially known as the ‘Finance Bill 2017–19’ (, I shall refer to it here by its common moniker – the Finance (No 2) Bill 2017. It is expected to be enacted before the end of this year as the Finance (No 2) Act 2017.

This Bill contains substantive proposals dropped from the spring Finance Bill when the general election was called for 8 June. At that stage Westminster’s majority Conservative administration confirmed there would be no policy change and the provisions in question would be legislated for at the first opportunity in the new Parliament.

After losing its majority, the new Government confirmed that it still expected to re-introduce the withdrawn provisions in a new Finance Bill soon after Parliament returned from its summer recess on 5 September. The Finance (No 2) Bill 2017 meets that commitment.


Among measures in the Bill

Some of the original proposals have been revised. In July my article Retroactive tax measures confirmed ( outlined some of the amended measures which the Autumn Finance Bill was expected to contain, and these are now included.

New provisions will give HMRC wide powers to introduce digital reporting and record keeping for VAT and income tax – in other words, Making Tax Digital (MTD) for businesses. From April 2019, businesses with turnover above the VAT threshold (currently £85,000) will have to keep their records digitally for VAT purposes, and submit VAT return information to HMRC through MTD-compatible software. MTD will be available on a voluntary basis to other businesses for VAT, and to all unincorporated businesses for income tax. Also on 13 September, draft secondary and tertiary legislation on MTD ( was published for consultation.

The long-awaited new rules on carried forward corporation tax losses, the restriction on interest and other financing amounts that a company may deduct in computing its profits, and relaxations in the substantial shareholdings exemption are all to be effective from 1 April 2017. Provisions relating to hybrid and other mismatches will apply from 1 January 2017, with some changes taking effect from 13 July 2017.

As expected until it was left in limbo at the time of the general election, the dividend allowance will be cut from £5,000 to £2,000 from 2018/19 onwards. This may have little impact on investors of average means who have built up investment portfolios with ISAs. However, it aims to discourage proprietors of owner-managed businesses from extracting cash as dividends.

The Bill provides that non-domiciled individuals born in the UK with a UK domicile of origin, or UK resident for at least 15 of the preceding 20 tax years, will be treated as domiciled in the UK. This will apply from 6 April 2017 as originally proposed.

Subject to possible exemptions and postponements, a new charge on outstanding loans from disguised remuneration schemes will apply to loans which were made after 5 April 1999 and are still outstanding on 5 April 2019.

Requirements to disclose VAT avoidance schemes to HMRC are to be changed from 1 January 2018 – not 1 September 2017 as originally proposed. Primary responsibility for disclosure will shift from users to promoters of arrangements. The regime will be extended to include insurance premium tax, all excise duties, soft drinks industry levy, landfill tax, aggregates levy, climate change levy and customs duties. Hallmarks, to determine if arrangements need to be disclosed, may be set in regulations.


Parliamentary timetable

The Finance (No 2) Bill is no minor chip off the original Bill. At 674 pages, supported by 345 pages of explanatory notes, it includes the vast majority of the measures originally put before Parliament on 14 March.

Since then the Prime Minister has triggered Article 50 of the Lisbon Treaty; the Conservatives have gone to the country and lost their Parliamentary majority, forcing them to rely on a controversial deal with the Democratic Unionists; and the Brexit talks have scarcely begun.

Westminster faces a massive programme of contentious legislation – primarily regarding the UK’s prospective exit from the EU. Time for Parliamentary debate will be a scarce commodity. It remains unclear whether there will be scope for proper scrutiny of tax changes – some arguably retroactive in their impact.

With all these pressures – not to mention interruptions such as the forthcoming party conferences and Parliament’s November mid-term break – the Finance (No 2) Bill may well not receive Royal Assent until just before the House of Commons rises for Christmas on 21 December.

In a curious case of legislative leapfrog, draft clauses for the Finance Bill 2018 have been published before Philip Hammond’s autumn Budget scheduled for 22 November, which may be delivered before measures from his earlier spring Budget are enacted.


The next Finance Bill

On 13 September the Government published draft clauses ( for the ‘Finance (No 2) Bill 2017–19’ – that is, the Finance Bill 2018. Given the change from a spring to an autumn Budget, it is unclear when this next Bill will be introduced in Parliament, but official consultation on the draft clauses will close on 25 October – ahead of the Budget.  They cover eight distinct tax policy areas.

Partnership tax rules will be modified to clarify how they apply where a partnership includes bare trustees or other partnerships; to ensure that partnership returns contain sufficient information to support HMRC’s assurance work; to provide a new, structured mechanism for resolving disputes between partners over taxable partnership profits and losses; and to relax reporting requirements for investment partnerships that report under the Common Reporting Standard.

The rules for termination payments are to be changed, and those who have worked abroad but are UK resident in the year their employment is terminated will be taxed in the same way as others who haven’t worked abroad.

Following changes already made to combat the future use of disguised remuneration avoidance schemes, a new close companies’ gateway will apply from April 2018. Amendments are also to be made to the new charge, to be enacted in Finance (No 2) Bill 2017 (see above), on disguised remuneration loans that remain outstanding on 5 April 2019.

From 6 April 2018, payments from an offshore trust intended for a UK resident individual will not escape tax when they are made via an overseas beneficiary or a remittance basis user.

Technical amendments to Landfill Tax in England and Wales will include a new measure to levy the tax on illegal waste disposals – following Scotland’s lead on this.

Further draft measures include registration rule changes for pension scheme administrators and trustees of existing pension schemes; removal of a withholding tax requirement from interest on debt traded on a multilateral trading facility; and changes to the scope of bank levy and its administration.

While this is only our first glimpse at the Finance Bill 2018, it does make one wonder whatever happened to tax simplification.


Article supplied by Taxing Words Ltd


Written by Ellie MacKenzie

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