Finance Bill 2021 update: Further amendments tabled

Further amendments to Finance Bill 2021 have been tabled by the Government ahead of the Report stage and third reading scheduled for 24 May 2021.

Further amendments to Finance Bill 2021 have been tabled by the Government ahead of the

The Report stage and third reading of Finance Bill 2021 are scheduled to take place on 24 May 2021. Ahead of this date a number of further amendments to the Bill have been tabled by the Government. In this edition of Tax Matters Digest we take a closer look at some of the newly proposed amendments, including in respect of the super-deduction, hybrid and other mismatches, the stamp duty land tax (SDLT) surcharge for overseas buyers and various VAT measures. Once the Report stage and third reading have taken place this will mark the completion of the Bill’s passage through the House of Commons, at which time the Bill (including the proposed corporation tax rate changes) will be regarded as ‘substantively enacted’ under IFRS and UK GAAP. Following ‘substantive enactment’ deferred tax assets and liabilities on balance sheets prepared to a later date may need to be re-measured accordingly.


A new amendment has been tabled by the Government which would extend the super-deduction and SR allowance provisions to leased background plant or machinery. For further details refer to our separate article.

Hybrid and other mismatches

During the Committee of the whole House stage, several amendments to the Finance Bill drafting on the hybrid and other mismatch rules were previously agreed to. One such change was to ensure that an amendment intended to switch off counteraction in relation to a sub-10 percent participant in a transparent fund operates as intended when determining the percentage holding a partner has in a partnership taking into account the interests of connected persons. A new Government amendment proposes making the same change to a different section, following engagement with stakeholders, to ensure that it operates as intended.

SDLT surcharge for overseas buyers

Certain changes were made to the new SDLT surcharge for overseas buyers of residential property in Finance Bill 2021 and further amendments have now been proposed by the Government ahead of the Bill’s Report stage. The surcharge operates as an extra 2 percent added to all residential rates of SDLT and applies to ‘non-resident’ individuals, unit trusts, partnerships and corporates buying residential property in England and Northern Ireland, as well as beneficiaries under life-interest and bare trusts and trustees of other types of trust, subject to some limited exceptions.

Broadly speaking, a company is ‘non-resident’ for the purposes of the surcharge where:

  • It is not UK resident for the purposes of the Corporation Tax Acts; or
  • It is a ‘close’ company, meets the ‘non-UK control test’ and is not an ‘excluded company’ (all quoted terms are specifically defined by the SDLT surcharge legislation).

The Government amendments proposed on 18 May 2021 take corporate trustees of settlements out of the scope of the non-UK control test and seek to ensure that the attribution of share rights rules in the non-UK control test have the intended effect.

VAT measures
A new clause has been proposed regarding the principle of abuse which prevents abuse of the VAT system. The measure clarifies UK domestic legislation to put beyond doubt that the principle of abuse (developed through and adopted in EU case law, e.g. Halifax and Kittel) continues to apply in the UK.

A new clause and schedule ‘VAT and distance selling: Northern Ireland’ have been proposed by the Government to implement VAT changes in Northern Ireland that mirror an EU-wide reform, as required by the Northern Ireland Protocol. One such change is to implement the One Stop Shop and the Import One Stop Shop accounting schemes in Northern Ireland.

A further new clause has also been tabled to introduce a reduced valuation provision for supplies of imported works of art, antiques and collectors’ items, sent in consignments valued at no more than £135, to ensure that they can continue to benefit from the effective reduced rate of VAT of 5 percent. This addresses an unintended consequence of an amendment to the place of supply of goods rules by the Taxation (Post-transition Period) Act 2020, which treats the UK as the place of supply of certain imported goods sent in consignments valued at no more than £135, thereby excluding them from s.21(4) VATA which provides for a reduced valuation to apply to imported works of art. The measure is proposed to have retrospective effect from the end of the Brexit Transition Period (11pm on 31 December 2020).

Other amendments

Further amendments have also been tabled by the Government in respect of penalties for persons who deliberately withhold information as a result of failure to make certain returns and the restriction of use of rebated diesel and biofuels.