Finance Bill Explanatory Notes 19 March 2020 Introduction ....................................................... 11 Part 1: Income Tax, Corporation Tax and Capital Gains Tax .............................................. 12 Clause 1: Income tax charge for tax year 2020 - 21 .......................................................................... 13 Clause 2: Main rates of income tax for tax year 2020- 21 ............................................................... 14 Clause 3: Default and savings rates of income tax for tax year 2020- 21 .................................... 16 Clause 4: Starting rate limit for savings for tax year 2020-21 ........................................................ 18 Clause 5: Main rate of corporation tax for financial year 2020 ............................................. 21 Clause 6: Corporation tax: charge and main rate for financial year 2021 ............................... 22 Clause 7: Determining the appropriate percentage for a car: tax year 2020-21 onwards .............................................................................. 23 Clause 8: Determining the appropriate percentage for a car: tax year 2020-21 only .... 30 1 Clause 9: Determining the appropriate percentage for a car: tax year 2021-22 only .... 35 Clause 10: Apprenticeship bursaries paid to persons leaving local authority care ............... 40 Clause 11: Tax treatment of certain Scottish social security benefits ...................................... 46 Clause 12: Power to exempt social security benefits from income tax .................................. 49 Clause 13: Voluntary office-holders: payments in respect of expenses ....................................... 51 Clause 14 and Schedule 1 (Part 1): Loan charge not to apply to loans or quasi-loans made before 9 December 2010 .................................... 55 Clause 15 and Schedule 1 (Part 2): Election for loan charge to be split over three tax years .... 60 Clause 16: Loan charge reduced where underlying liability disclosed but unenforceable ..................................................... 70 Clause 17: Relief from interest on tax payable by a person subject to the loan charge ............ 79 2 Clause 18: Minor amendments relating to the loan charge ......................................................... 85 Clause 19: Repaying sums paid to HMRC under agreements relating to certain loans etc .............................................................................. 89 Clause 20: Operation of the scheme ................ 96 Clause 21: Annual allowance: tapered reduction ........................................................... 105 Clause 22 and Schedule 2: Entrepreneurs’ relief: reduction in lifetime limit .................... 109 Clause 23: Relief on disposal of private residence ........................................................... 122 Clause 24 and Schedule 3: Corporate capital losses ................................................................. 131 Clause 25: Quarterly instalment payments .. 166 Clause 26: Relief from CGT for loans to traders ............................................................................ 171 Clause 27: Research and development expenditure credit ........................................... 173 Clause 28: Structures and buildings allowances: rate of relief ................................. 175 3 Clause 29 and Schedule 4: Structures and buildings allowances: miscellaneous amendments ..................................................... 180 Clause 30: Intangible fixed assets: pre-FA 2002 assets etc ........................................................... 188 Clause 31 and Schedule 5: Non-UK resident companies carrying on UK property businesses etc ................................................... 205 Clause 32: Surcharge on banking companies: transferred-in losses ........................................ 211 Clause 33 and Schedule 6: CT payment plans for tax on certain transactions with EEA residents ............................................................ 215 Clause 34: Changes to accounting standards affecting leases ................................................. 226 Clause 35: Enterprise investment scheme: approved investment fund as nominee ........ 229 Clause 36: Gains from contracts for life insurance etc: top slicing relief ...................... 234 Clause 37: Losses on disposal of shares: abolition of requirement to be UK business 237 4 Part 2: Digital Services Tax ............................. 240 Clause 38: Digital services tax: introduction 241 Clause 39: Meaning of “digital services revenues” .......................................................... 244 Clause 40: Meaning of “UK digital services revenues” .......................................................... 246 Clause 41: UK digital services revenues: accommodation and land ............................... 250 Clause 42: Meaning of “digital services activity” etc. ...................................................... 252 Clause 43: Meaning of “user” and “UK user” ............................................................................ 255 Clause 44: Exclusion for online financial marketplaces .................................................... 257 Clause 45: Meaning of “the threshold conditions” ....................................................... 259 Clause 46: Charge to DST ............................... 261 Clause 47: Alternative basis of charge .......... 264 Clause 48: Section 47: meaning of “relevant operating expenses” ........................................ 267 5 Clause 49: Relief for certain cross-border transactions ...................................................... 269 Clause 50: When DST is due and payable .... 271 Clause 51: Meaning of “the responsible member” ........................................................... 272 Clause 52: Continuity of obligations etc where change in the responsible member ................ 274 Clause 53: Duty to notify HMRC when threshold conditions are met ......................... 276 Clause 54: Duty to notify HMRC of change in relevant information ....................................... 278 Clause 55 and Schedule 7: Duty to file returns ............................................................................ 280 Clause 56: Meaning of “group”, “parent” etc ............................................................................ 289 Clause 57: Section 56: meaning of “relevant entity”................................................................ 292 Clause 58: Continuity of a group over time . 294 Clause 59: Treatment of stapled entities ....... 296 Clause 60: Accounting periods and meaning of “a group’s accounts” ....................................... 298 6 Clause 61: Apportionment of revenues or expenses to accounting period ...................... 300 Clause 62: Meaning of revenues arising, or expenses recognised, in a period ................... 302 Clause 63: Meaning of “the applicable accounting standards” etc .............................. 304 Clause 64: Anti-avoidance .............................. 306 Clause 65 and Schedule 8: Notice requiring payment from other group members ........... 308 Clause 66: Interest on overdue DST .............. 311 Clause 67: Interest on overpaid DST etc ....... 313 Clause 68: Recovery of DST liability ............. 315 Clause 69 and Schedule 9: Minor and consequential amendments ............................ 316 Clause 70: Review of DST ............................... 318 Clause 71: Interpretation of Part .................... 319 Part 3: Other Taxes .......................................... 320 Clause 72: Excluded property etc .................. 321 Clause 73: Transfers between settlements etc ............................................................................ 327 7 Clause 74: Relief for victims of persecution during Second World War era ....................... 333 Clause 75: Stamp duty: transfers of unlisted securities and connected persons .................. 335 Clause 76: SDRT: unlisted securities and connected persons ........................................... 340 Clause 77: Stamp duty: acquisition of target company’s share capital ................................. 346 Clause 78: Call-off stock arrangements ........ 350 Clause 79: Post-duty point dilution of wine or made-wine ........................................................ 363 Clause 80: Rates of tobacco products duty .. 366 Clause 81: Rates for light passenger or light goods vehicles, motorcycles etc ..................... 370 Clause 82: Applicable CO2 emissions figure determined using WLTP values .................... 375 Clause 83: Light passenger vehicles with low CO2 emissions – extension of exemption ..... 378 Clause 84: Motor caravans ............................. 381 Clause 85: Exemption in respect of medical courier vehicles ................................................ 384 8 Clause 86 and Schedule 10: Rebated fuel: private pleasure craft ...................................... 387 Clause 87: Rates of air passenger duty from 1 April 2021 ......................................................... 397 Clause 88: Amounts of gross gaming yield charged to gaming duty ................................. 400 Clause 89: Rates of climate change levy until 1 April 2021 ......................................................... 402 Clause 90: Rates of climate change levy from 1 April 2021 ......................................................... 407 Clause 91: Rates of landfill tax ....................... 410 Clause 92 and Schedule 11: Carbon