The Finance Bill: here we go again!

Mark McLaughlin highlights some important provisions in the latest Finance Bill and notes some other measures still to come.

Another cycle of new tax legislation has begun. The latest Finance Bill was published on 7 November 2018. Its official title is Finance (No. 3) Bill 2017-19, but it could perhaps be less confusingly described as Finance Bill 2019, as it will eventually become Finance Act 2019 upon receiving Royal Assent.

Never mind the quantity…

The current Finance Bill contains 315 pages of legislation (not to mention 270 pages of explanatory notes). In recent years, some Finance Bills have exceeded 650 pages, so practitioners should perhaps count their blessings and feel relieved that they have ‘got off lightly’ in terms of bedtime reading!

The government’s policy these days is to announce in the Budget tax measures not only to be introduced in the next Finance Act and/or the next tax year, but also in the longer term. This can sometimes be confusing, so it is often necessary to study the ‘small print’ in the Budget documentation to establish when the measures will appear in statute.

There are 92 sections and 19 Schedules in the current Finance Bill. This article highlights three provisions of possible relevance to many practitioners in their everyday work, as well as some selected provisions to watch out for in the future.

  1. Entrepreneurs’ relief

The entrepreneurs’ relief (ER) legislation is amended by the Finance Bill in three ways. The first, and probably the most important, amendment is broadly to increase the qualifying period for satisfying the ER conditions from one year to two years for disposals on or after 6 April 2019, subject to transitional rules in certain cases.

The second change introduces two new tests in order to satisfy the ‘personal company’ requirement (in TCGA 1992, s 169S) for disposals from 29 October 2018, in addition to the existing 5% tests for ordinary share capital and voting rights. The new conditions require the individual to be beneficially entitled to at least 5% of the company’s distributable profits and 5% of its assets available for distribution to equity holders in a winding up. This change is likely to result in (among other things) some companies having to change the rights attaching to existing shares (e.g. certain ‘alphabet’ share arrangements) to enable those shares to qualify individual shareholders for ER (subject to the other ER conditions being satisfied). However, the potential tax implications of doing so will need to be considered carefully.

The third change is to introduce provisions which are intended to enable individuals whose shareholding is ‘diluted’ below the 5% qualifying threshold for ER purposes as a result of a new share issue to obtain relief for chargeable gains on the shares up to that time. The new provisions, which apply to relevant share issues from 6 April 2019, feature two election facilities. The first (in what will become TCGA 1992, s 169SC) is to determine the gain on the shares at the time of dilution; the second (in new TCGA 1992, s 169SD) is to defer the gain until a subsequent disposal of the shares. This is a welcome change to the ER rules, which has been introduced following the unfortunate loss of ER in the dilution case McQuillan v Revenue and Customs [2017] UKUT 344 (TCC), and probably in other instances as well.

  1. CGT reporting and payment window

Another important change extends (from 6 April 2019) the existing CGT reporting and payment on account obligations for non-UK residents disposing of all UK land and property (i.e. residential and non-residential, including direct and indirect disposals), whether or not a gain arises. This general rule is subject to certain exceptions, such as ‘no gain, no loss’ disposals for tax purposes. An indirect interest in a company is potentially affected broadly if it derives at least 75% of its value from UK land, and the person has a ‘substantial indirect interest’ in that land, i.e. in terms of having had a 25% investment in the company at any time in the two years ending with the disposal.

In addition, and perhaps of greater relevance to most practitioners, from 6 April 2020 new reporting and payment on account obligations are to be introduced for residential property disposals by UK residents (and UK branches and agencies of non-UK resident persons).

Where the reporting provisions apply, there is a basic obligation to make a return within 30 days of the day following completion of the disposal. However, this general rule is subject to certain exceptions, such as where a residential property gain arises but no payment on account is required. In addition, where a return is needed and CGT is chargeable, a payment on account of the liability is also generally required, which is payable on the filing date for the return.

Practitioners will therefore need to train their clients to keep them informed of reportable disposals in ‘real time’ and on an ongoing basis.

  1. Capital allowances: annual investment allowance

The annual investment allowance (AIA) is a popular form of capital allowance on plant and machinery expenditure. The maximum amount of expenditure on which AIA can be claimed has increased and decreased following its introduction in April 2008.

Helpfully, the AIA is to be increased once more, from £200,000 to £1 million, for a two-year period from 1 January 2019 to 31 December 2020. It will revert to its previous level of £200,000 from 1 January 2021.

Transitional rules will apply for businesses with chargeable periods that straddle 1 January 2019 or 1 January 2021. The AIA will be computed in two parts. For periods straddling 1 January 2019, the allowance will be calculated by reference to an AIA of £200,000 for the period before 1 January 2019 and by reference to an AIA of £1 million for the period after the change. The reverse will apply where the period straddles 1 January 2021.

Wait and see…

As mentioned, numerous provisions announced by the government were not included in the current Finance Bill. The most notable ones include:

  • Private residence relief - From April 2020, the private residence relief final period exemption (in TCGA 1992, s 223(1)) will be reduced from 18 months to nine months, and lettings relief will be restricted so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The government is to consult on these changes prior to the private residence relief provisions being amended.
  • IR35 and the private sector - The government’s proposed introduction of the off-payroll working rules into the private sector will not be introduced until April 2020. When it does, it is intended that small organisations will be exempt.
  • Penalties reform – The government still intends to reform the late filing and late payment penalties provisions (i.e. to introduce a penalty points-based system). The reforms will be included in a future Finance Bill.

The devil’s in the detail

The above is only a very broad outline of some detailed and potentially complex provisions. As always, the devil is in the detail, and reference should therefore be made to the legislation in each case. The Finance (No.3) Bill 2017-19 can be accessed via the Parliament’s website, and explanatory notes are available from the website.

Subscribers to the Bloomsbury Professional Tax online service can use the Finance (No.3) Bill 2017-19 progress tracker to review the Finance Bill provisions and follow the progress of the legislation through Parliament to Royal Assent.

Mark McLaughlin CTA (Fellow) ATT (Fellow) TEP is a tax consultant to professional firms ( and, co-founder of TaxationWeb ( and Editor of McLaughlin’s Tax Case Review (

Mark McLaughlin

Written by Mark McLaughlin

Mark McLaughlin CTA (Fellow) ATT (Fellow) TEP is a consultant to professional firms with the TACS Partnership LLP ( Mark is also co-founder of TaxationWeb (

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