Finance Bill 2016 now final

Report stage took place in the House of Commons on 5 and 6 September (see www.bit.ly/29VvGoZ). One new clause was added to the Bill and a number of amendments agreed, including an opposition amendment to Sch 19 introducing a power for the Treasury to make regulations requiring large businesses to include a country by country report when they publish their group tax strategy.

The financial secretary to the Treasury, Jane Ellison, expressed the government’s support for public country by country reporting, but only where it is ‘agreed on a multilateral basis’. This would mean, the financial secretary said, reporting by ‘all groups, both UK headquartered and non-UK headquartered’. Such an international approach is, she said, ‘vital for ensuring that the policy intention of greater transparency is delivered. It is also important for ensuring that UK headquartered groups are not put at a competitive disadvantage’. The government is therefore unlikely to invoke this power before a greater degree of international consensus emerges.

The following amendments were agreed:

·         Clause 18 (employment income provided through third parties): extending until 1 April 2017 the date for withdrawal of the transitional relief available in respect of investment growth in tax avoidance schemes using employee benefit trusts;

·         Clause 19 (pensions standard lifetime allowance from 2016-17): ensuring that where pension benefits are paid to beneficiaries after 6 April 2016, following the death of a member before 6 April 2016, the benefits are tested against the standard lifetime allowance in force at the time of the member’s death;

·         Clause 31 (VCTs: requirements for giving approval): adding short term deposits of money, including bank deposits, to the list of non-qualifying investments a venture capital trust may make on or after 6 April 2016;

·         Clause 82 (reduction in rate of CGT): introducing a comprehensive definition of ‘carried interest gains’ which are not eligible for the reduction in CGT rates from 6 April 2016;

·         Clause 125 (VAT: women’s sanitary products): providing that the commencement date for zero-rating of women’s sanitary products must not be after the later of 1 April 2017 and the earliest date that may be appointed consistently with the UK’s EU obligations;

·         Clause 155 (GAAR: provisional counteractions): a small change to include a ‘pooling notice’ within the provisional counteraction rules;

·         Schedule 1 (dividend nil rate and abolition of dividend tax credits etc): including a change to ‘type 4 income’ of discretionary and accumulation trusts (income on which tax is charged at the basic rate), to ensure that all tax paid on dividend income within the first £1,000 of income goes into the tax pool;

·         Schedule 9 (profits from the exploitation of patents etc: consequential): correcting a defect which could result in different definitions of the term ‘qualifying residual profit’ applying in the same parts of the modified patent box legislation;

·         Schedule 10 (hybrid and other mismatches): further amendments to ensure that the legislation operates as intended;

·         Schedule 17 (fuel duties: aqua methanol etc): changing the commencement date for the reduced rate of duty for aqua methanol from 1 October 2016 to 14 November 2016;

·         Schedule 19 (large businesses: tax strategies and sanctions) – opposition amendment to include a power for the Treasury to make regulations requiring inclusion of a country-by-country report in the published group tax strategy; and

·         New clause 9 (tax treatment of supplementary welfare payments: Northern Ireland): allowing regulations to be made exempting from income tax supplementary payments to currently tax-exempt social security benefits in Northern Ireland on or after 6 April 2016.

The Bill passed its third reading in the House of Commons and will go to the House of Lords for consideration on 13 September. No further amendments can be made before royal assent.