Some other items of note from Finance Bill 2017.
In addition to the key measures in the previous article, Finance (No. 2) Bill 2016-17 contained further information on some other tax measures. Here, we highlight updates on the requirement to correct, museums and galleries exhibition tax relief, the allowance for pensions advice, foreign pension schemes, and the reduced money purchase annual allowance.
Requirement to Correct
Legislation had previously been published introducing a new legal obligation for those impacted to correct any issue in relation to their ‘offshore matters’ that has given rise to a UK tax liability. This requirement is described as a Requirement to Correct (RTC). RTC requires any tax issue mainly or wholly relating to offshore matters for all periods up to 5 April 2017 to be corrected by 30 September 2018. This date is consistent with the date information will be exchanged with HMRC from around 100 countries under the Common Reporting Standard (CRS). The level of sanctions for those who fail to correct when required to do so are unprecedented. Penalties will start at 200 percent of the tax liability (can be reduced but no lower than 100 percent). For the most serious cases an additional penalty of up to 10 percent of the value of the relevant asset will apply as well as the reputational damage of being ‘named and shamed’ on a public website.
In the 20 March FB 2017 clauses, the Government has provided some more clarity around what a reasonable excuse is. The key is to take some reassurance action now to ensure there is no failure to correct. For further information see our article Do you hold offshore assets? Take care not to trip up!
Museums and galleries exhibition tax relief
Finance Bill 2017 includes a new tax relief for exhibitions of scientific, historic, artistic or cultural interest. This will largely apply to museums and galleries, but can also apply to libraries, archives, historic homes, outdoor exhibitions, universities, or similar institutions hosting an exhibition which is open to the general public. Claimant companies must be either a charity, or wholly owned by a charity or local authority. Although the company responsible for the exhibition needs to be within the charge to corporation tax, charitable companies still qualify even if they do not actually pay corporation tax. The relief is very generous, offering 16-20p in the £ for the costs of producing and de-installing exhibitions, and can also be claimed by venues who are hosting an exhibition whilst on tour. The relief applies from 1 April 2017 so it is worth ensuring that exhibitions will meet the qualifying criteria and that systems are in place to track the relevant costs.
The Finance Bill introduces a £500 tax allowance for employer-funded advice on pensions and on general financial and tax issues relating to pensions, as long as it is offered either to all employees, or to all employees at a particular location, or to all employees (or all at a location) within five years of their minimum pension age.
Foreign pension schemes
Under provisions in the Finance Bill:
Reduced money purchase annual allowance
Following consultation the Government has included provision in Finance Bill 2017 to reduce the money purchase annual allowance (MPAA) from £10,000 to £4,000 with effect from 6 April 2017. The MPAA applies when someone receives benefits in a flexible way from a defined contribution pension scheme – e.g. takes their pot as a single lump sum or a series of lump sums, or takes drawdown income. It restricts future tax-relieved contributions to defined contribution pension schemes and is in place to prevent excessive ‘recycling’ of income through pensions.
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