The September finance bill: an overview

While this week’s Paradise Papers revelations have rekindled the public debate and added pressure for further action to deter tax avoidance and evasion, for many businesses and tax advisers the immediate concern is keeping on top of changes already announced.

The second finance bill of 2017 has now completed its House of Commons stages, and will be considered ­– although it cannot be amended – by the House of Lords on 15 November, just a week before the chancellor is set to deliver his autumn budget. Consultation on several measures to be included in the next finance bill closed on 25 October …

My article for AAT Comment, November 7

Consistent application of UK law under threat, Lords committee says

Experts have warned that the complexity of U.K. tax law poses a threat to lawyers’ and judges’ ability to apply it consistently, a House of Lords committee reported, a day after a government minister praised lawmakers’ rapid progress in examining the current, 665-page finance bill.

Experts have warned that the complexity of UK tax law poses a threat to lawyers’ and judges’ ability to apply it consistently, a House of Lords committee reported, a day after a government minister praised lawmakers’ rapid progress in examining the current, 665-page finance bill. The House of Lords Constitution Committee called for changes to the way legislation is developed to enable thorough parliamentary scrutiny and improve the quality of law. Legislation should be made more accessible and easier to understand for both practitioners and the public, the committee said in an October 25 release …

… Members of a public bill committee “rocketed through” the current finance bill efficiently and “in near-record time,” Financial Secretary to the Treasury Mel Stride remarked as the committee completed its examination of the bill ahead of schedule on October 24. Read more:

My news story for Tax Analysts, October 27 (paywall)

Preparing better legislation: Lords call for changes to law-making

UK lawmakers approve corporate interest restriction

The UK House of Commons finance bill committee on October 19 approved lengthy and complex rules restricting tax relief for corporate interest, while rejecting proposals for a stricter regime for PFI companies.

The Chartered Institute of Taxation said the measure, effective from April 1, 2017, has been rushed. “It is unsatisfactory that businesses have been put in a position of having to plan for these proposals before they are enacted due to their significantly retrospective effect,” it said in an October 17 submission to the committee …

The corporate interest restriction measure in Schedule 5 occupies 156 pages of the 665-page finance bill. A series of amendments proposed by Labour member of Parliament Stella Creasy would have introduced stricter rules for PFI companies. Read more:

My news story for Tax Analysts, October 21 (paywall)

UK lawmakers approve finance bill as Brexit overshadows debate

Members of Parliament approved the UK’s second finance bill of 2017, voting 320 to 299 after six hours of debate at the bill’s second reading September 12.

The bill will now proceed to its committee stage in October, after a three-week recess for the annual political party conferences. It is expected to become the second finance act of 2017 in November. Read more:

My news story for Tax Analysts, September 14 (paywall)

Parliament website: Finance Bill 2017-19

UK tax professionals voice dismay at 665-page finance bill

The complexity of the UK tax code is out of control, and principles of certainty and proportionality are being sacrificed, tax professionals warned after the publication of a 665-page finance bill days before a scheduled debate by members of Parliament …

Draft clauses for a further finance bill, to be published after the autumn budget and to be enacted in Finance Act 2018, will be published for consultation on September 13 …

Tax professionals expressed dismay at the length of the bill published on September 8 …

Jeremy Cape, partner at Squire Patton Boggs, told Tax Analysts that the bill includes provisions that mark significant changes of direction for the U.K.’s tax code.

“The reason these measures were dropped [in April] was to ensure that they would be afforded proper parliamentary scrutiny once reintroduced,” Cape said. “That seems extremely ambitious and unlikely.” The Brexit process and the unexpected general election result have caused pressure on the parliamentary timetable to grow to the point where such scrutiny is “a mere pipe dream,” he said. Read more:

My news story for Tax Analysts, September 9 (paywall)

HMRC warns against rebranding loans as critics challenge retrospective charge

Rebranding loans to avoid a controversial income tax charge scheduled for 2019 on “disguised remuneration” will not work, HMRC has warned, while tax professionals insist the proposed charge is disproportionate. Scheme users are being told they can sign documents saying that the sums they’ve received under loan agreements are not loans at all, HMRC said in an August 10 statement

The U.K. government announced in the 2016 budget that there would be a new charge on “loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5 April 2019” …

The loan charge formed part of the finance bill published in March, but it was one of several measures dropped to make way for the general election in June. A revised draft measure including six clarifying amendments was published July 13.

“We do not condone disguised remuneration schemes but we do feel that the remedy contravenes normal standards of fairness,” said the Tax Faculty of the Institute of Chartered Accountants in England and Wales on its website July 25. Peter Bickley, a technical manager at the Tax Faculty, told Tax Analysts that if the charge is passed into law, its application should be proportionate, perhaps “going back no more than six years before the measure was announced.” Making taxpayers bankrupt would not help the exchequer, he said.

Read more: My news story for Tax Analysts, August 14 (paywall)

See also the Tax Faculty’s updates and representations of July 25 and April 20.

Tax professionals have also noted that HMRC will need to consider, in taking forward the proposed loan charge, the impact of the Supreme Court’s recent decision in the “Rangers case”.

Another finance bill set to be passed with very little scrutiny

We now know that the 600 or so pages of finance bill measures withdrawn in April to make way for the general election will be reintroduced, with some technical amendments, “as soon as possible after the summer recess”. There will be very little time for debate in the shadow of the Brexit negotiations, but concerns continue to be expressed about the some of the measures.

It’s interesting to look back to mid-April, just before Theresa May called the election, when Andrew Tyrie, then chairman of the Treasury Committee, said he would continue to press the government to allow for MPs examining finance bills to consult tax experts before beginning detailed scrutiny of the legislation. Continue reading