Share with your friends

Draft Finance Bill 2018/19 - other measures

Draft Finance Bill 2018/19 - other measures

Some other items of note from Finance Bill 2018/19.

Michelle Quest

Head of Tax and Legal Services

KPMG in the UK


Also on

Corporate interest restriction (CIR)

One of the proposed amendments is to extend the deadline for appointing a reporting company until 12 months after the end of the relevant period of account (as compared to 6 months under the existing legislation), thus aligning the deadline for doing so with the deadline that applies for filing the interest restriction return. We understand that this proposed change will apply to appointments made from Royal Assent. Where the original deadline for a group has passed and the group failed to appoint a reporting company before that deadline, HMRC can be asked to exercise their discretion to appoint a reporting company for the group.  

Changes that are wholly relieving will take affect retrospectively from 1 April 2017.  Most other changes will take effect for periods of account of the worldwide group beginning on or after 1 January 2019.

Several of the proposed changes are intended to align amounts taken from the group accounts with amounts taken from the tax computations.

Changes will also be made to improve the interaction of the CIR rules with the rules for real estate investment trusts (REITs) to ensure that the REIT interest cover ratio test does not give rise to double restriction of interest payable.

In relation to the public infrastructure regime, the scope of the assets that will qualify towards meeting the ‘assets test’ is extended and reimbursement of expenses will not prevent pre-13 May 2016 related party loans from benefiting from grandfathering.

Employment taxes: proposed changes

Draft clauses have been published which, if enacted, will make the following changes to the tax treatment of employer provided vehicles and ancillary benefits:

  • Where a taxable car or van is provided under Optional Remuneration Arrangements (OpRA), from 6 April 2019 the amount foregone will include associated costs (such as insurance), and any capital contribution will be adjusted where the vehicle is made available for only part of the year, to allow the amount forgone to be compared with the standard car or van benefit charge on a ‘like for like’ basis (this amendment corrects two anomalies so that the OpRA rules work as intended);
  • Workplace charging facilities for all-electric or plug-in hybrid vehicles will be exempt from income tax and NIC with effect from 6 April 2018; and
  • The benefit in kind associated with private use of emergency vehicles will be reduced with effect from 6 April 2017.

Additionally, draft legislation has been published which will enable HMRC’s overseas scale rates to be placed on a statutory footing. Changes will also be made to allow employers to pay or reimburse qualifying travel and subsistence using either overseas or domestic scale rates (as appropriate) without requiring employers to operate a system of checking employees’ expenditure. Instead the new legislation will only require employers to ensure that employees are undertaking qualifying travel. These changes will apply on and after 6 April 2019.

The conditions for relief in respect of employer contributions to qualifying recognised overseas pension schemes and employer paid life insurance premiums will be modified such that, from 6 April 2019, employees will be able to nominate any individual or a registered charity as beneficiary without a benefit in kind arising.

Allowing Entrepreneurs’ Relief (ER) on gains made before dilution

Legislation will be introduced from 6 April 2019 which allows individuals who are diluted below 5% following a fund raising after 6 April 2019 to elect for their ER to be crystallised at the time of share issue. There will also be an election allowing the individual to defer any tax due until a future liquidity event. Positively, after representations from a number of parties including KPMG, the provisions now include a clause that means when calculating the gain at the date of dilution for shares, the market value of the shares is calculated as by reference to the consideration that would be received on a disposal of the company’s entire share capital. This means the relief is potentially of real value to individuals and an important point to consider where individuals are to be diluted below the 5% threshold.

Corporation tax: Exit charges

s187 TCGA 1992 and s860 CTA 2009, which provide for the postponement of an exit charge where a company ceases to be UK-resident, but its UK parent company assumes the liability on its behalf, are repealed for companies that become non-UK resident on or after 1 January 2020. The draft legislation also incorporates changes to the exit charges deferred payment rules in Sch 3ZB TMA 1970. Tax payable in relation to exit charges on migration to another EEA state will be payable in instalments over five years, effective from 1 January 2020.

Corporation tax: Carried forward losses

The draft legislation makes a number of technical amendments to ensure that the legislation operates as intended, including an amendment to the computation of ‘relevant profits’ so that the deductions allowance used is the full amount of the company’s entitlement for the period. The change to the deductions allowance takes effect from 6 July 2018, with most other changes taking effect from 1 April 2019.

Stamp Duty and SDLT

Legislation ensuring that Stamp Duty and SDLT are not charged following exercise of certain resolution powers under the special resolution regime for failing financial institutions will be introduced. The legislation will have effect for instruments executed, and land transactions in England and Northern Ireland with an effective date, on or after Royal Assent. 

The time limit for filing an SDLT return and payment of the tax due will reduce from 30 days after the effective date of the transaction to 14 days. The reduced time limit will apply to transactions to purchase land in England and Northern Ireland with an effective date on or after 1 March 2019. By exception, the time limit for submitting ‘further SDLT returns’ will continue to be 30 days where tax or an additional amount of tax is payable: e.g., where a later linked transaction causes another return to be required in respect of an earlier transaction.

Interest harmonisation and sanctions for late submission and late payment

The Government has published proposals and draft legislation for amendments to the interest payable on late payments and repayments of tax, and for a new penalty regime for late payment. Draft legislation has also been published for the point-based late submission penalty regime which was set out in the Government’s consultation response on this subject in December 2017.

Interest on VAT will be brought broadly into line with interest on direct taxes. There will be special rules to prevent repayment interest from being paid in respect of periods during which HMRC enquiries are in progress, taxpayers have outstanding returns or certain other requirements are not satisfied.

A new late payment penalty regime will be introduced for income tax, capital gains tax, corporation tax and VAT. There will be two elements:

  • A ‘first penalty’ payable if tax remains due at the end of the 15 day period following the due date; and
  • A ‘second penalty’ if any tax remains unpaid at the end of the 30 day period from the due date.

Draft legislation has also been published to implement the points-based penalty regime set out in the December consultation response for late submission of returns. The legislation covers VAT, income tax and capital gains tax, as well as excise, environmental and other taxes, but not corporation tax (although the same approach is to be applied to corporation tax at some future date).

The level at which penalties will be set has yet to be decided. Following consultation on the draft clauses, the proposals are expected to be implemented for VAT from 1 April 2020. Timescales for other taxes will be announced in due course.

Resolution of double taxation disputes

Draft Finance Bill 2018/19 includes enabling clauses to provide for EU Council Directive 2017/1852 on resolution mechanisms for double taxation disputes in the EU, which amends the European Arbitration Convention, to be enacted in domestic legislation. For details of the measures included in the Directive, please see our previous article. The Directive is required to be transposed into domestic legislation by 30 June 2019 and, on the basis that the UK will no longer be an EU Member State at that date, there is therefore uncertainty on the extent to which the UK will continue to be a signatory to the convention, and hence how (and if) the Directive will be implemented into UK domestic legislation. We understand that it is likely that cases already subject to the EU dispute resolution process will continue to be covered until resolution, however this is not currently certain and therefore it is advisable to make use of double taxation treaties where possible.

© 2020 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

Connect with us


Want to do business with KPMG?


loading image Request for proposal