Finance (No.2) Bill 2017 | KPMG | UK
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Finance (No.2) Bill 2017

Finance (No.2) Bill 2017

Following the release of Finance (No.2) Bill 2017on 8 September, we take a look at some of the changes.


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As covered in last week’s Tax Matters Digest, the Government has now published Finance Bill 2017 – 2019 (which we will refer to as Finance (No.2) Bill 2017). The Bill had its Second Reading on 12 September, and will now proceed to Committee Stage, with the Committee of the whole House scheduled to take place on 11 October. As had been expected, there have been some changes since updated draft legislation was published in July, although the majority of these changes are minor in nature.

The most significant corporate tax measures in the Bill are mainly unchanged since the previous versions published. The legislation on corporation tax losses and hybrid and other mismatches remains almost identical to the 13 July updates whereas there are minor changes, mainly affecting infrastructure companies, to the legislation on the corporate interest restriction (CIR) and substantial shareholding exemption (SSE):

  • The CIR legislation now makes it clear that a public infrastructure asset must be an asset “in relation to the company” and there is a small change to the effective date of the joint election for two or more group companies to modify the application of the qualifying infrastructure company provisions (S435 TIOPA 2010).
  • Within the SSE legislation there is a minor change to the new exemption for Qualifying Institutional Investors (QII). A QII can satisfy the substantial shareholding requirement with an investment of £20 million provided this entitles it to a proportionate percentage of the profits available for distribution or assets on a winding up. The change is that this requirement will still be regarded as satisfied where the percentage to which the QII is actually entitled is less than the proportionate percentage, provided the difference is insignificant (having regard to the proportion which the actual percentage bears to the proportionate percentage).

For individuals, the Bill contains the new deemed domicile rules for income tax and capital gains tax as well as inheritance tax on UK residential property owned through non-UK companies and partnerships and related finance arrangements. The rules are in line with what was published previously, with some minor concessions which reflect the delay in the legislation becoming law. As previously announced, these new rules will be effective from 6 April 2017.

Assuming the Bill receives Royal Assent without further amendment, long term resident non-doms who satisfy the new deemed domicile tests under either the 15/20 year residence rule or as ‘UK returners’, will be deemed domiciled in 2017/18 for income tax, capital gains tax and inheritance tax purposes. The associated protections for offshore trusts settled by such individuals, rebasing of non-UK assets, and ‘cleansing’ of mixed funds will also be introduced from 6 April 2017. Shares in a non-UK resident company or partnership, which in turn owns UK residential property, will have been within the UK inheritance tax net since 6 April 2017, as will certain related loans and loan collateral.

For employers, many of the measures included in Finance (No.2) Bill 2017 have not changed from the draft legislation. However, there were minor technical changes on the disguised remuneration measures that will introduce a PAYE and NIC charge on loans from Employee Benefit Trusts and other third parties made to employees or directors on or after 6 April 1999 and which remain outstanding at 5 April 2019. For more information on the employment taxes measures in the Bill, see our Employers’ Club article here.

For further information please contact:

Grace Havard

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