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UK Publishes Draft Finance Bill

by Jason Gorringe,, London

14 December 2010

In a move that the government says demonstrates its commitment to improving tax policy making, it has, for the first time, published in draft the majority of the measures for the 2011 Finance Bill.

It is also publishing its response to the consultation ‘Tax Policy Making: A New Approach’, which sets out changes to the way tax policy will be developed and communicated. Accordingly, the government has announced that Finance Bill 2011 will be published on March 31, 2011.

According to the Treasury, the publication of draft Finance Bill clauses “will become a permanent feature of the tax policy cycle. Taken together with other improvements, these reforms will reduce the volume and frequency of changes to the tax system, providing greater predictability and transparency.”

David Gauke, Exchequer Secretary to the Treasury, said: "Today’s draft finance bill marks a substantial improvement in the way we create tax policy. Not only is this draft finance bill the shortest in recent years, it is also the most transparent. By giving people and businesses time to adjust to these tax changes, as well as inviting them to comment on the changes, we are making tax policy significantly more accountable."

The government said that it is “unprecedented” for such a large volume of legislation to be placed in the public domain for consultation. It makes the point, however, that at 255 pages, it is 178 pages shorter than last year’s bill, with 70 fewer clauses.

Among the draft clauses published are responses to the consultation on the simplification of corporate capital gains and details on the levy on bank’s balance sheets to be introduced on January 1, 2011.

The final legislation contains changes to the rate of the levy. The rate for 2011 will be 0.05%, rather than 0.04%, and it will rise to 0.075% from 2012, instead of the 0.07% announced in June. The levy, which is permanent, is intended to encourage banks to move to less risky funding profiles, and will take effect from January 1, 2011.

The changes will generate around GBP2.5bn of annual revenues, in line with Budget estimates.

Financial Secretary to the Treasury, Mark Hoban commented: "We have consulted on the design of the scheme so that it achieves two objectives: first, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. Second, the final scheme design will encourage the banks to make greater use of more stable sources of funding, such as long-term debt and equity, working with the grain of our wider reform programme."

TAGS: capital gains tax (CGT) | tax | business | banking | United Kingdom | legislation | tax reform

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