Overview of Legislation in Draft 5 December 2016 © Crow n Copyright 2016 You may re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://w w w.nationalarchives.gov.uk/doc/open-government-licence/ or w rite to the Information Policy Team, The National Archives, Kew , London TW9 4DU, or e-mail: [email protected]. 2 Contents Introduction .................................................................................................................... 4 Consultation on draft legislation................................................................................. 5 List of abbreviations ..................................................................................................... 6 Information about changes to tax legislation ........................................................... 7 1. Direct Taxes ........................................................................................................... 7 2. Corporation Tax .....................................................................................................17 3. Domicile ...............................................................................................................24 4. Indirect taxes ........................................................................................................25 5. Annual Tax on Enveloped Dwellings ..........................................................................28 6. Administration and Enforcement..............................................................................29 Effect of tax policy changes on devolved administrations................................... 34 Tax information and impact notes...………………………………………………………………………39 3 Introduction This document provides an overview of legislative changes to tax law which the government plans to introduce in Finance Bill 2017, in secondary legislation, and (in some cases) in future Finance Bills. It also covers a small number of non-legislative announcements that will be of interest to tax professionals. It includes changes arising from announcements on 23 November at Autumn Statement 2016, and Budget 2016, where not already enacted. This document provides a short summary of all tax measures, an indication of what consultation has been done on these changes to date, and whether or not the tax information and impact note (TIIN) has been published on 5 December 2016. If draft legislation is published for consultation, or there is a response document, this is also shown with a link at the end of the paragraph. Details are also given of those measures where legislation was published on 23 November 2016. New fiscal event timetable Autumn Statement 2016 announced that the government would move towards having one main annual fiscal event. After the spring 2017 Budget, Budgets will be delivered in the autumn with the first one taking place in autumn 2017. The Office for Budget Responsibility will produce a spring forecast from spring 2018 and the government will make a Spring Statement responding to that forecast. Making the transition to the new timetable will require adjustments to the normal tax policy making process due to the shorter interval between the 2 Budgets. Arrangements will be decided individually for different policies and set out to stakeholders by HM Revenue and Customs (HMRC). In the normal way, these will where possible provide for consultation on policy proposals and on draft legislation. 7 things you need to know about the new Budget timetable. 4 Consultation on draft legislation The government has committed to confirming the majority of measures for inclusion in the Finance Bill at least 3 months prior to introduction of the Bill itself and, where possible, to publish draft legislation for each of these measures. This provides taxpayers with certainty about future planned tax changes and allows time for pre- legislative scrutiny. The majority of the draft legislation and explanatory notes for Finance Bill 2017 have been published alongside this document. The consultation on draft provisions is intended to ensure that the legislation works as intended. The final contents of Finance Bill 2017 will be subject to confirmation at the spring Budget 2017. Many of the measures covered in this document were first announced at Budget 2016 and consultations on policy have been carried out over the spring and summer. The government has published a number of responses to these consultations alongside this document. What has been published? The government has published draft provisions for Finance Bill 2017 for consultation. Where secondary legislation will give substantive effect to the Finance Bill provision, this has also been published in draft. Each provision is accompanied by: • a TIIN which sets out what the legislation seeks to achieve, why the government is undertaking the change and a summary of the expected impacts • an explanatory note which provides a more detailed guide to the legislation This material is published on the GOV.UK website. The government’s responses to most of the policy consultations carried out over the summer have also been published on the GOV.UK website. Contacts and closing date If you wish to comment on any of the draft provisions, please use the contact details provided at the end of the relevant explanatory note. The closing date for comments is 1 February 2017, unless stated otherwise. 5 List of abbreviations BIR Business Investment Relief CEMA Customs and Excise Management Act CGT Capital Gains Tax CoACSs Co-ownership Authorised Contractual Schemes CPI Consumer Prices Index EIS Enterprise Investment Scheme FA Finance Act HMRC HM Revenue & Customs IHT Inheritance Tax ISA Individual savings account IP Intellectual Property ISA Individual Savings Account NICs National Insurance Contributions OECD Organisation for Economic Co-operation and Development OTS Office of Tax Simplification PAYE Pay As You Earn PSA PAYE Settlement Agreement TIIN Tax Information and Impact Note 6 Information about changes to tax legislation 1. Direct Taxes 1.1. Personal Allowance and the higher rate threshold As announced at Autumn Statement 2016, the government will raise the Income Tax Personal Allowance to £12,500, and the higher rate threshold to £50,000, by the end of this Parliament. Next year, the Personal Allowance will rise to £11,500 and the higher rate threshold to £45,000. 1.2. Deduction of Income Tax at source from savings income As announced at Budget 2016, the government will legislate in Finance Bill 2017 to remove the requirement for tax to be deducted at source from interest distributions of open-ended investment companies, authorised unit trusts and investment trust companies, and from interest on peer-to-peer loans. The changes will take effect from 6 April 2017. This will bring these types of savings income into line with the treatment of interest paid on bank and building society accounts. A response document has been published. Draft legislation (provision 12) and a TIIN has been published on 5 December 2016. 1.3. Retaining the band for the starting rate of savings Income Tax As announced at Autumn Statement 2016, the government will retain the limit for the 0% starting rate for savings at its current level of £5,000 for 2017 to 2018. 1.4. Indexing the Personal Allowance by CPI once it has reached £12,500 As announced at Autumn Statement 2016, the government will legislate to ensure that once the Income Tax Personal Allowance reaches £12,500, it will subsequently be indexed in line with the growth of the CPI, rather than being set equal to the annual salary of an individual working 30 hours per week on the National Minimum Wage as under current legislation in Finance (No.2) Act 2015. 1.5. ISA uprating As announced at Autumn Statement 2016, the government will uprate the annual subscription limit for Junior ISAs and Child Trust Funds in line with the CPI to £4,128, alongside the ISA subscription limit increase from £15,240 to £20,000, which was previously announced at Budget 2016. This will be effective from 6 April 2017. These new limits will be applied by updates to the ISA and Child Trust Fund Regulations. 7 1.6. National Insurance thresholds As announced at Autumn Statement 2016 and as recommended by the Office of Tax Simplification (OTS) in March 2016, the government will align the secondary (employer) threshold with the primary (employee) threshold for the National Insurance contributions (NICs). This means that from April 2017, both employers and employees will start paying NICs on weekly earnings above £157. The changes will be made through regulations as part of the routine NICs re-rating process and will come into force on 6 April 2017. A TIIN has been published on 5 December 2016. 1.7. Abolition of Class 2 NICs As confirmed at Autumn Statement 2016 following consultation, the government will legislate to abolish Class 2 NICs from April 2018. This will simplify the National Insurance regime for the self-employed. From the 2018 to 2019 tax year onwards, no new Class 2 liabilities will arise and it will not be possible to make voluntary payments of Class 2 for that tax year and later tax years. The legislation will not make any changes to the ability of people to make Class 2 payments, including voluntary payments, with respect to the 2017 to 2018 tax year and earlier. As well as abolishing Class 2 NICs the legislation will include provisions to introduce a contributory