On 20 July, the Government announced the taxation and other measures for consultation for the Finance Bill 2021-22.
The draft legislation largely covers pre-announced policy changes, along with accompanying explanatory notes, tax information and impact notes, as well as responses to consultations and other supporting documents.
The Government has also revealed three new policies that it will legislate for in the autumn:
- The exemption from income tax on payments for the COVID Winter Grant/Local Grant.
- The new Child Winter Heating Assistance and the Short Term Assistance social security payments made by the Scottish Government will not be subject to income tax.
- Payments made by the London Capital & Finance Compensation Scheme will not be subject to Capital Gains Tax.
The main areas of the Finance bill 2021-22
Income Tax draft legislation
The proposal changes the basis period rules for unincorporated businesses from a ‘current year basis’ to a ‘tax year basis’. The transition would take place from 2022 to 2023. The changes would come into effect from 2023 to 2024.
A business’s profit or loss for a tax year would be the profit or loss that occurs in the actual tax year itself, regardless of its accounting date.
Increases to the minimum pension age for Pensions Tax
Introducing an age increase from 55 to 57 in 2028. Savers will have to wait an additional two years to access their pensions without incurring unauthorised payments tax charges unless they retire due to ill-health.
Pension Scheme Pays reporting – information and notice deadlines
This measure extends the information and notice deadlines for individuals to ask their pension scheme to settle their annual allowance charge of £2,000 or more from a previous tax year. In a process known as Scheme Pays, this will reduce their future pension benefits.
Taxation of asset-holding companies in alternative fund structures
A qualifying asset-holding company must:
- Be at least 70 per cent owned by diversely owned funds, controlled by regulated managers or institutional investors.
- Exist to help move capital, income and gains between investors and underlying investments.
Real Estate Investment Trusts
The measure amends the tax rules that apply to Real Estate Investment Trusts. It also changes the conditions that a company must meet to be a UK Real Estate Investment Trust.
Corporation Tax: amendments to the hybrid and other mismatches rules
The Corporation Tax amendments set out how to counter mismatches for payments to hybrid entities. The outcome of these changes is proportionate when relevant entities are transparent in their home jurisdiction.
Capital allowances – amendment to statement for structures and buildings allowance: This amendment requires you to record additional information on your allowance statement. The amendment will make it easier for businesses to assess if they are entitled to structures and buildings allowance.
Insurance Premium Tax – identifying where the risk is situated
The criteria for determining a location of risk for Insurance Premium Tax to primary legislation is changing and will provide clarity for the insurance industry.
New proposals to clamp down on promoters of tax avoidance: The introduction of these new proposals will:
- Make sure promoters face tough actions to discourage them from operating
- Disrupt their activities
- Do more to support customers to steer clear of and leave tax avoidance arrangements.
Powers to tackle electronic sales suppression
New powers will reduce opportunities and decrease the existing use of electronic sales suppression, which is where businesses or individuals use technology to artificially reduce their reported sales and corresponding tax liabilities.
Notification of uncertain tax treatment
Large businesses need to tell HMRC if they adopt an uncertain tax treatment defined by HMRC notification criteria and subject to a monetary threshold set out in legislation.
Tracing and security for tobacco products
HMRC regulation-making powers will introduce tougher, more visible street-level sanctions to tackle tobacco duty evasion.
If you have any questions, please contact us.
Link: Draft legislation for Finance Bill 2021-22
