Finance Bill Explanatory Notes 19 March 2020 Introduction ............................................................................................................................................ 5 Part 1: Income Tax, Corporation Tax and Capital Gains Tax .......................................................... 6 Clause 1: Income tax charge for tax year 2020 - 21 ............................................................................ 7 Clause 2: Main rates of income tax for tax year 2020- 21 ................................................................. 8 Clause 3: Default and savings rates of income tax for tax year 2020- 21 ........................................ 9 Clause 4: Starting rate limit for savings for tax year 2020-21 ........................................................ 10 Clause 5: Main rate of corporation tax for financial year 2020 ...................................................... 11 Clause 6: Corporation tax: charge and main rate for financial year 2021 .................................... 12 Clause 7: Determining the appropriate percentage for a car: tax year 2020-21 onwards .......... 13 Clause 8: Determining the appropriate percentage for a car: tax year 2020-21 only .................. 15 Clause 9: Determining the appropriate percentage for a car: tax year 2021-22 only .................. 17 Clause 10: Apprenticeship bursaries paid to persons leaving local authority care .................... 19 Clause 11: Tax treatment of certain Scottish social security benefits ............................................ 21 Clause 12: Power to exempt social security benefits from income tax ......................................... 22 Clause 13: Voluntary office-holders: payments in respect of expenses ....................................... 23 Clause 14 and Schedule 1 (Part 1): Loan charge not to apply to loans or quasi-loans made before 9 December 2010 ...................................................................................................................... 25 Clause 15 and Schedule 1 (Part 2): Election for loan charge to be split over three tax years .... 27 Clause 16: Loan charge reduced where underlying liability disclosed but unenforceable ....... 31 Clause 17: Relief from interest on tax payable by a person subject to the loan charge .............. 34 Clause 18: Minor amendments relating to the loan charge ........................................................... 36 Clause 19: Repaying sums paid to HMRC under agreements relating to certain loans etc ...... 38 Clause 20: Operation of the scheme .................................................................................................. 41 Clause 21: Annual allowance: tapered reduction ............................................................................ 44 Clause 22 and Schedule 2: Entrepreneurs’ relief: reduction in lifetime limit .............................. 46 Clause 23: Relief on disposal of private residence .......................................................................... 50 Clause 24 and Schedule 3: Corporate capital losses........................................................................ 53 Clause 25: Quarterly instalment payments ...................................................................................... 65 Clause 26: Relief from CGT for loans to traders .............................................................................. 67 Clause 27: Research and development expenditure credit ............................................................ 68 Clause 28: Structures and buildings allowances: rate of relief ...................................................... 69 Clause 29 and Schedule 4: Structures and buildings allowances: miscellaneous amendments71 Clause 30: Intangible fixed assets: pre-FA 2002 assets etc ............................................................. 74 1 Clause 31 and Schedule 5: Non-UK resident companies carrying on UK property businesses etc ........................................................................................................................................................... 80 Clause 32: Surcharge on banking companies: transferred-in losses ............................................. 82 Clause 33 and Schedule 6: CT payment plans for tax on certain transactions with EEA residents ................................................................................................................................................ 84 Clause 34: Changes to accounting standards affecting leases ....................................................... 88 Clause 35: Enterprise investment scheme: approved investment fund as nominee .................. 89 Clause 36: Gains from contracts for life insurance etc: top slicing relief ...................................... 91 Clause 37: Losses on disposal of shares: abolition of requirement to be UK business .............. 93 Part 2: Digital Services Tax ................................................................................................................. 95 Clause 38: Digital services tax: introduction .................................................................................... 96 Clause 39: Meaning of “digital services revenues” ......................................................................... 97 Clause 40: Meaning of “UK digital services revenues” .................................................................. 98 Clause 41: UK digital services revenues: accommodation and land .......................................... 100 Clause 42: Meaning of “digital services activity” etc. ................................................................... 101 Clause 43: Meaning of “user” and “UK user” ............................................................................... 103 Clause 44: Exclusion for online financial marketplaces ............................................................... 104 Clause 45: Meaning of “the threshold conditions” ....................................................................... 105 Clause 46: Charge to DST ................................................................................................................. 106 Clause 47: Alternative basis of charge ............................................................................................ 107 Clause 48: Section 47: meaning of “relevant operating expenses” ............................................. 108 Clause 49: Relief for certain cross-border transactions ................................................................. 109 Clause 50: When DST is due and payable ...................................................................................... 110 Clause 51: Meaning of “the responsible member” ........................................................................ 111 Clause 52: Continuity of obligations etc where change in the responsible member ................ 112 Clause 53: Duty to notify HMRC when threshold conditions are met ...................................... 113 Clause 54: Duty to notify HMRC of change in relevant information ......................................... 114 Clause 55 and Schedule 7: Duty to file returns .............................................................................. 115 Clause 56: Meaning of “group”, “parent” etc ................................................................................ 118 Clause 57: Section 56: meaning of “relevant entity” ..................................................................... 119 Clause 58: Continuity of a group over time ................................................................................... 120 Clause 59: Treatment of stapled entities ......................................................................................... 121 Clause 60: Accounting periods and meaning of “a group’s accounts” ...................................... 122 Clause 61: Apportionment of revenues or expenses to accounting period ............................... 123 2 Clause 62: Meaning of revenues arising, or expenses recognised, in a period ......................... 124 Clause 63: Meaning of “the applicable accounting standards” etc ............................................. 125 Clause 64: Anti-avoidance ................................................................................................................ 126 Clause 65 and Schedule 8: Notice requiring payment from other group members ................. 127 Clause 66: Interest on overdue DST ................................................................................................ 129 Clause 67: Interest on overpaid DST etc ......................................................................................... 130 Clause 68: Recovery of DST liability ............................................................................................... 131 Clause 69 and Schedule 9: Minor and consequential amendments ............................................ 132 Clause 70: Review of DST ................................................................................................................. 133 Clause 71: Interpretation of Part ...................................................................................................... 134 Part 3: Other Taxes ............................................................................................................................ 135 Clause 72: Excluded property etc .................................................................................................... 136 Clause