FINANCE (No. 2) BILL EXPLANATORY NOTES Bill 270–EN 58/1 FINANCE (No. 2) BILL Table of Contents Introduction ............................................................................................................................................ 6 Part 1: Income Tax, Corporation Tax and Capital Gains Tax .......................................................... 7 Clause 1: Income tax charge for tax year 2021-22 .............................................................................. 8 Clause 2: Main rates of income tax for tax year 2021- 22 ................................................................. 9 Clause 3: Default and savings rates of income tax for tax year 2021-22 ....................................... 10 Clause 4: Starting rate limit for savings for the tax year 2021-22 .................................................. 11 Clause 5: Basic rate limit and personal allowance for future tax years ........................................ 12 Clause 6: Charge and main rate for financial years 2022 and 2023 ............................................... 13 Clause 7 and Schedule 1: Small profits rate chargeable on companies from 1 April 2023 ........ 14 Clause 8: Increase in the rate of diverted profits tax ....................................................................... 20 Clause 9: Super-deductions and other temporary first-year allowances ..................................... 21 Clause 10: Further provision about super-deductions etc ............................................................. 24 Clause 11: Reduced super-deduction ............................................................................................... 26 Clause 12: Disposal of assets where super-deduction made ......................................................... 28 Clause 13: Disposal of assets where SR allowance made ............................................................... 30 Clause 14: Counteraction where arrangements are contrived etc ................................................ 32 Clause 15: Extension of temporary increase in annual investment allowance ........................... 34 Clause 16: Meaning of “general decommissioning expenditure”................................................. 36 Clause 17: Extensions of plant or machinery leases for reasons related to coronavirus ............ 38 Clause 18 and Schedule 2: Temporary extension of periods to which trade losses may be carried back .......................................................................................................................................... 40 Clause 19 and Schedules 3 and 4: R&D tax credits for SMEs ........................................................ 45 Clause 20: Extension of social investment tax relief for further two years .................................. 48 Clause 21: Workers’ services provided through intermediaries ................................................... 49 Clause 22: Payments on termination of employment ..................................................................... 52 Clause 23: Cash equivalent benefit of a zero emissions van .......................................................... 54 Clause 24: Enterprise management incentives ................................................................................ 55 Clause 25: Cycles and cyclist’s safety equipment ........................................................................... 57 Clause 26: Exemption for coronavirus tests ..................................................................................... 59 Clause 27: Optional remuneration arrangements: statutory parental bereavement pay .......... 61 Clause 28: Freezing the standard lifetime allowance ..................................................................... 63 Clause 29 and Schedule 5: Pension schemes: collective money purchase benefits .................... 64 Clause 30 and Schedule 6: Construction industry scheme ............................................................ 73 Clause 31: Covid-19 support scheme: working households receiving tax credits ...................... 77 1 FINANCE (No. 2) BILL Clause 32: Self-employment income support scheme .................................................................... 78 Clause 33: Deduction where business rates etc repaid ................................................................... 80 Clause 34: Repeal of provisions relating to the Interest and Royalties Directive ....................... 82 Clause 35: Payments made to victims of modern slavery etc ........................................................ 83 Clause 36 and Schedule 7: Hybrid and other Mismatches ............................................................. 84 Clause 37 and Schedule 8: Relief from corporation tax for losses etc ......................................... 105 Clause 38: Corporate interest restriction: minor amendments .................................................... 110 Clause 39: Northern Ireland Housing Executive ........................................................................... 112 Clause 40: Annual exempt amount ................................................................................................. 113 Clause 41: Hold-over relief for foreign-controlled companies .................................................... 114 Part 2: Plastic Packaging Tax ............................................................................................................ 115 Clause 42: Plastic packaging tax ...................................................................................................... 116 Clause 43: Charge to plastic packaging tax .................................................................................... 118 Clause 44: Liability to pay plastic packaging tax .......................................................................... 119 Clause 45: Rate ................................................................................................................................... 120 Clause 46: Payment ........................................................................................................................... 121 Clause 47: Chargeable plastic packaging components ................................................................. 122 Clause 48: Meaning of “plastic packaging component” .............................................................. 124 Clause 49: Meaning of “plastic” and “recycled plastic” ............................................................... 126 Clause 50: Time of importation ....................................................................................................... 128 Clause 51: Plastic packaging components intended for export ................................................... 129 Clause 52: Exempt plastic packaging components ...................................................................... 131 Clause 53: Tax credits ........................................................................................................................ 133 Clause 54: The register ...................................................................................................................... 135 Clause 55: Liability to register: producers and importers ............................................................ 136 Clause 56: Notification of liability and registration ...................................................................... 138 Clause 57: Cancellation of registration ........................................................................................... 139 Clause 58: Correction of the register ............................................................................................... 141 Clause 59 and Schedule 9: Notices imposing secondary or joint and several liability ............ 142 Clause 60: Measurement of weight etc ........................................................................................... 151 Clause 61 and Schedule 10: Payment, collection, recovery .......................................................... 153 Clause 62 and Schedule 11: Reviews and appeals ........................................................................ 158 Clause 63: Records ............................................................................................................................. 163 Clause 64 and Schedule 12: Information and evidence ................................................................ 165 Clause 65: Security for tax ................................................................................................................ 168 2 FINANCE (No. 2) BILL Clause 66: Unincorporated bodies .................................................................................................. 169 Clause 67: Service .............................................................................................................................. 170 Clause 68: Statements for business customers ............................................................................... 171 Clause 69: Tax representatives of non-resident taxpayers ........................................................... 172 Clause 70: Adjustment of contracts ................................................................................................. 174 Clause 71 and Schedule 13: Groups of companies ........................................................................ 175 Clause 72: Prevention of artificial separation of business activities: directions ....................... 179 Clause 73: Prevention of artificial