Following the 2016 Budget on 16 March, the Finance (No. 2) Bill 2016 was published on 24 March 2016. Many of the clauses were published in draft in December 2015 or have been previously consulted on, but the Bill also contains further information on items announced for the first time at the Budget.We have prepared commentary on a number of items which are either new or changed from the draft clauses released last year.
click on the titles below to read more detailed technical notes on each measure.
Improving Large Business Tax Compliance
While some requirements for the publication of tax strategies have been dropped, the scope of the legislation has been extended to include UK PEs of overseas groups and certain subsidiaries of overseas parent companies.
Transfer pricing: application of OECD principles
The definition of ‘the transfer pricing guidelines’ has been updated to incorporate certain recent amendments made to OECD Transfer Pricing Guidelines, although there is one interesting omission.
Transitional rules dealing with certain ‘grandfathered’ products have been included, along with changes to the ‘safeguarding’ rules that apply to grandfathering.
Changes include an extension of the rules to eliminate the tax advantage arising from the use of mismatches involving permanent establishments, and a new anti-avoidance provision.
Reduction in CGT rates for individuals from 6 April 2016
The Bill confirms that from 6 April 2016, lower CGT rates will apply to capital gains realised by individuals that are not “upper rate gains”.
Non-residents' CGT charge tax return relaxation
The Bill contains legislation allowing HMRC to prescribe circumstances that mean non-UK residents disposing of UK residential property will not be required to submit a non-resident CGT tax return to HMRC.
Asset-based penalty for an individual's offshore inaccuracies and failures
Where there is a deliberate inaccuracy in an individual’s tax return, or a deliberate failure to notify, which relates to an offshore asset and a loss of tax, HMRC will now be able to charge an asset-based penalty.
This new relief applies to external investors in unlisted trading companies (or holding companies of trading groups).
Entrepreneurs' relief - Associated disposals and joint venture companies
HMRC have relaxed prior changes for certain joint venture companies and extended the availability of ER for certain associated disposals.
Income-based carried interest
A number of changes have been made to the draft legislation, including a reduction in the weighted average holding period, and special provisions relating to several different types of funds.
Venture Capital Trusts - new primary condition
From 6 April 2016, VCTs will no longer be permitted to make any non-qualifying investments which are not certain liquid investments
Company distributions Anti-avoidance
The Targeted Anti Abuse Rule has been relaxed to ensure that it only applies to individuals who own an interest of at least 5 percent in the company, and will not apply to the extent that the proceeds received by the individual would not result in a capital gain.
Employment Taxes and Global Mobility
From an employment taxes perspective, although there are some amendments to the draft legislation previously published, these are, on the whole, relatively minor. Our Flash Alert gives an overview of those provisions in the Bill likely to be of interest to internationally mobile individuals and their employers.
Women's sanitary products VAT rate change from 5 percent to zero rate
A new piece of legislation changes the rate of VAT on women’s sanitary products from the reduced rate to zero rated.
Tackling VAT evasion by overseas sellers
Where overseas sellers on online marketplaces sell goods from UK warehouses, HMRC will be able to make the online marketplaces jointly and severally liable for the VAT.