11 December 2015
On Wednesday 9 December HM Treasury published the draft Finance Bill 2016 legislation with all the associated explanatory notes, policy papers and consultations. With so much published in one go it will take a bit of time for it all to sink in, and with most of the proposals being open for comment and consultation there is scope for change between now and next year’s Budget, which has been announced for 16 March 2016.
So let’s just consider a few of the more interesting announcements:
- Distributions in a Liquidation – measures have been announced which are intended, with effect from 6 April 2016, to strengthen existing transactions in securities rules and to introduce a targeted anti avoidance rule with the effect of replacing capital gains tax treatment with an income tax charge on the liquidation of a close company where the owners continue, or start within two years, to operate in a similar business to that which was liquidated;
- Landlords’ Wear and Tear Allowance – was previously announced as being abolished in April 2016 and replaced with a renewals basis allowance for expenditure on household goods. On the face of it the new rules look fairly common sense and as expected;
- Tax Return Procedures – the digital tax account is proposed to be available for all small businesses and individuals by 2016/17 although given the time frame we suspect that is more of a re-brand of the existing business A phased rollout begins 14 December 2015 and we’re keen to see the agent authorisation function brought in. Probably more interesting is the suggestion of quarterly updates of information being required on these accounts by 2020 (seemingly four mini tax returns per year rather than one full one) and a surprise announcement about simple assessments of income and capital gains tax outside of the tax return process from April 2016. It’s hard to imagine exactly how the latter might work, and no one in our industry has yet worked out how quarterly tax reporting will represent a cost saving to small businesses;
- Patent Box – EU objections to state aid generosity already meant we have a June 2016 deadline for electing in to this regime of tax relief. We’ve now got some detail of ‘new patent box’ which will seemingly replace the existing regime for entrants after that date;
- ISA – whilst a surviving spouse can essentially inherit their deceased partner’s ISA’s within the tax favoured wrapper, there is now a discussion as to retaining that tax favoured status during the estate administration process;
- Inheritance Tax Allowances – the second half of the legislation providing for the main residence allowance (effective April 2017) has been published, detailing how downsizing or selling the home and moving into care will work;
- Domicile – the detail surrounding the proposal to align various tax regime’s deemed domicile rules into a 15 out of 20 years rule has been published. As has more controversial detail regarding UK born individuals and their domicile status if they return for just 1 year of UK residence having previously adopted a domicile of choice overseas;
- Savings Income – from April 2016 the savings rate band allowance will be with us. The legislation provides for £1,000 tax free for basic rate payers, £500 for higher rate and £nil for additional rate payers;
- Dividend Changes – those higher earners will have to console themselves with getting the most benefit from the £5,000 dividend allowance which comes in at the same time, draft legislation about which was also published; and
- Pensions Lifetime Allowances – were already planned to drop from £1.25m to £1m from April 2016. From 2017/18 the limit will see CPI based increases, and as expected there is protection available for those concerned about exceeding the limit. With two new types of protection available, it seems that pensions will continue to be legislated in an unnecessarily complex fashion.
These are by no means all of the measures announced, but are a few of those we feel have broadest application or are of particular interest. Anyone wanting to see the full list can look at Gov.uk and to find out more about any of the announcements and how they might impact on your personal or business circumstances, please contact Graham Boar.