Tax confusion due to Finance Bill changes

shutterstock_101302753
The original Finance Bill 2017 published in March amounted to 762 pages and contained draft legislation on a whole range of tax changes which were due to take effect from 1 April this year for companies and 6 April this year for individuals.  However, the imminent general election has caused all that to change.

Vast swathes of legislation have been dropped from the Bill –  72 out of 135 clauses and 18 out of 29 schedules have been dropped.  The volume of the bill has effectively decreased by over 80%. This is to allow time for the Bill to be debated and passed before parliament shuts down in the run-up to the General Election.

This has caused confusion and uncertainty for many taxpayers who were expecting to be affected by tax changes taking effect from 1 or 6 April or who were hoping to use the new legislation to carry out tax planning transactions.

Some of the key pieces of legislation removed from the Bill were:

  • Making tax digital – the Government has reaffirmed its commitment to making tax digital but it is not known whether the intended start date of 1 April 2018 will be delayed.  This is an enormous project and uncertainty for taxpayers is increasing as we get nearer to 1 April 2018 with no clear idea of what the requirements of the new system will be.
  • Changes to corporate loss relief – new rules were due to take effect bringing increased flexibility for brought forward tax losses and restrictions on the use of losses for large companies.  It is not now clear when those rules will take effect and this is causing uncertainty for many companies as to their tax position.
  • Restrictions to corporate interest deductibility – due to commence on 1 April 2017 but now uncertain.
  • The relaxation of the Substantial Shareholdings Exemption which allows the tax-free sale of qualifying shareholdings by companies – a major widening of these rules was due to commence on 1 April 2017 and a number of groups of companies were planning to restructure their holdings utilising the new rules.
  • The reduction of the dividend allowance from £5,000 to £2,000 due in 2018/19 – as yet there is no indication that this will change.
  • The £1,000 tax-free allowance for property and sundry income which was due to come into effect on 6 April 2017.
  • First year allowances on electric vehicle charging points – due from 1 April 2017.

Assuming no major surprises in the election result, it is expected that the government will legislate at their earliest opportunity at the start of the new parliament.  However, it is unlikely that such legislation will be retrospective in respect of the proposals due to start on 1 April 2017 but this has not been confirmed.  In the meantime, our advice is to hold fire on any planning under the new rules and keep a close eye on developments.

For further advice on any of the above issues contact Claire Astley on Claire.astley@pmm.co.uk or Jonathan Cunningham on jonathan.cunningham@pmm.co.uk