Share with your friends

Finance Bill 2018-19 published

Finance Bill 2018-19 published

On 7 November 2018 Finance (No.3) Bill, which will become Finance Act 2019 after Royal Assent, was published.

Image of Sharon Baynham

Director, Tax Policy

KPMG in the UK


Also on

On 7 November 2018, Finance (No. 3) Bill 2017-19 was published. This bill will become Finance Act 2019 once it has completed its path through Parliament and, for simplicity, HMRC are referring to it as Finance Bill 2018-19 so we will use the same naming convention. The Finance Bill is largely as expected following the Autumn Budget but there are areas where the legislation has provided significant further detail and we have included articles on some of these below. At the moment no details have been published on the exact timetable for the passage of the bill other than the second reading which is scheduled for 12 November. There were also a number of consultations published alongside the bill, most notably for a proposed digital services tax.

There are various areas where there have been key changes to the draft Finance Bill clauses published on 6 July this year, or where significant new legislation has been introduced including the following:

  • Capital allowances; 
  • Taxation of intangibles; and
  • Hybrid capital instruments.

We have provided commentary on these items in this issue of Tax Matters Digest and will provide further commentary on other key measures, such as the taxation of gains on real estate and controlled foreign companies, next week.

Other items of note in the Finance Bill are discussed in brief below.

Corporation tax and CGT exit charges
The Finance Bill introduces two capital gains related measures for corporation tax. The first, effective from 1 January 2020, provides for a deemed market value base cost for capital gains tax (CGT) and intangible fixed assets that come within the UK charge to corporation tax as a result of a non-resident company becoming UK resident (or beginning to use the asset in a UK permanent establishment (PE)) and suffering an exit charge in another EU jurisdiction. The second, effective from 6 April 2019, allows companies resident in another EEA member state, who suffer deemed disposals because assets ceased to be used in a UK PE, to enter into an exit charge payment plan and pay the tax due in six equal annual instalments. These changes appear to look ahead to Brexit, and the potential for Brexit related CGT exposures. 

Diverted Profits Tax (DPT)
The rules have been amended to:

  • Address potential planning opportunities with respect to the interaction between transfer pricing rules and the calculation of diverted profits;
  • Extend the end of the charging notice review period to 15 months after the relevant DPT charge due date (subject to certain commencement provisions); and
  • Change the period during which a preliminary DPT notice may be issued under sections 80 and 81 (Part 3 of FA 2015), to end six months after the last day on which an amendment of the company tax return can be made (subject to certain commencement provisions).

Leases: changes to accounting standards
The Finance Bill includes revised legislation to deal with the impact of IFRS 16 on tax. The amendments are helpful clarifications or minor issues. Companies with December year-ends now have very little time to take the following key actions:

  • Identify the transitional adjustments to rentals on adopting IFRS 16 and calculate the period over which these can be written off for tax; and
  • Put in place systems to (1) identify IFRS 16 leases which would be operating leases under FRS 102, and (2) produce data on the related Profit and Loss costs. These steps are needed for Corporate Interest Restriction purposes.   

International tax enforcement: disclosable arrangements
The Finance Bill includes enabling legislation which will allow the Government to implement amendments to the EU Directive on mandatory automatic exchange of information. In effect, this clause allows for the introduction of the EU Mandatory Disclosure (DAC6) rules which we understand will be implemented via secondary legislation during 2019. We are expecting draft legislation and guidance in the early part of next year and we understand this will be subject to consultation.

The clause also gives the flexibility to enact recommendations of the OECD regarding Mandatory Disclosure Rules for Common Reporting Standard Avoidance Arrangements and Opaque Offshore Structures.

© 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