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UK Confirms Tax Changes In Second Finance Bill 2017

by Jason Gorringe,, London

12 September 2017

The UK Government has introduced a second draft of the Finance Bill 2017, with measures reintroduced that were dropped from the shorter first draft owing to the snap election.

The draft includes new penalties for those who enable the use of tax avoidance schemes that are later defeated by HMRC; an update on the rules around company interest expenses, to ensure big businesses cannot use excessive interest payments to reduce the amount of tax they pay; and changes to prevent individuals from using artificial schemes to avoid paying the tax they owe on their earnings.

The Bill will also abolish permanent non-dom status, so that those who have lived in the UK for many years pay UK tax in the same way as UK residents. It includes a reduction in the dividend allowance from GBP5,000 (USD6,638) to GBP2,000 from April 2018, limiting the difference in tax treatment between those who work through their own company, and those who work as employees or self-employed and a reduction to the Money Purchase Annual Allowance from GBP10,000 to GBP4,000. This latter change is intended to limit the extent to which people can recycle their pension savings to get extra tax relief.

John Cullinane, CIOT Tax Policy Director, said: "The contents of the Bill are pretty much as we expected – that is, the measures dropped from the pre-election Finance Bill. The only measures dropped appear to be a clause on landfill tax and two clauses on Customs enforcement powers. We are expecting some significant proposals on landfill tax to be announced next week which will feed into the third Finance Bill of the year, in December."

He highlighted that the Bill will be the second-longest Finance Bill ever, adding: "The most significant measures in the Bill are probably changes to corporation tax and to the regime for non-UK domiciles. The two schedules on corporation tax loss relief and interest deductibility now run to 303 pages between them, not far off half the Bill on their own. The Bill also contains clauses paving the way for Making Tax Digital, substantial changes to the rules for fulfillment businesses, and a range of anti-avoidance measures, including penalties for enablers of avoidance schemes."

"At 674 pages it will be beaten only by the 703-page Finance Act 2012. While much of the new legislation will only apply to larger businesses this will still represent a further complicating of the tax system, both by lengthening the code and through the process of change."

TAGS: individuals | Finance | tax | business | tax avoidance | interest | employees | corporation tax | United Kingdom | enforcement | legislation | penalties | Tax

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