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UK: Finance Bill 2018-19, tax provisions and related consultations

UK: Finance Bill 2018-19, tax provisions

Finance (No.3) Bill—that would become Finance Act 2019—was published on 7 November 2018.

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The Finance Bill is largely as expected following the Autumn Budget, but with further detail regarding certain areas. Currently, there is no information as to an exact timetable for the passage of the bill other than the second reading, scheduled for 12 November 2018. There were also a number of related consultations—in particular, the proposed digital services tax.

There are various areas where there have been key changes to the draft Finance Bill clauses (published 6 July 2018), with new legislation having been introduced about:

  • Capital allowances
  • Taxation of intangibles
  • Hybrid capital instruments

 

Other items of note in the Finance Bill include:

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)
  • 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 and changes to accounting standards

The Finance Bill includes revised legislation to deal with the implications of IFRS 16 on tax. Companies with a December year-end 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
  • 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 (steps are needed for corporate interest restriction purposes)   

International tax enforcement and disclosable arrangements

The Finance Bill includes enabling legislation to 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 that could be implemented via secondary legislation during 2019. 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.

 

Read a November 2018 report prepared by the KPMG member firm in the UK

Consultations and more related to Finance Bill

Read more KPMG reports about HMRC consultations published with the Finance Bill 2018-19 or other legislation:

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