Finance (No. 3) Bill Explanatory Notes 7 November 2018 Introduction ............................................................................................................................. 5 Part 1: Direct taxes .................................................................................................................. 6 Clause 1: Income tax charge for tax year 2019-20 .............................................................. 7 Clause 2: Corporation tax charge for financial year 2020 ................................................. 8 Clause 3: Main rates of income tax for tax year 2019-20 ................................................... 9 Clause 4: Default and savings rates of income tax for tax year 2019-20 ....................... 10 Clause 5: Basic rate limit and personal allowance ........................................................... 11 Clause 6: Starting rate limit for savings for tax year 2019-20 ......................................... 13 Clause 7: Optional remuneration arrangements: arrangements for cars and vans .... 14 Clause 8: Exemption for benefit in form of vehicle-battery charging at workplace ... 17 Clause 9: Exemptions relating to emergency vehicles .................................................... 19 Clause 10: Exemption for expenses related to travel ....................................................... 22 Clause 11: Beneficiaries of tax-exempt employer-provided pension benefits ............. 24 Clause 12: Tax treatment of social security income ......................................................... 25 Clause 13 and Schedule 1: Disposals by non-UK residents etc ...................................... 27 Clause 14 and Schedule 2: Disposals of UK land etc: payments on account of capital gains tax ................................................................................................................................. 46 Clause 15 and Schedule 3: Offshore receipts in respect of intangible property .......... 51 Clause 16 and Schedule 4: Avoidance involving profit fragmentation arrangements 61 Clause 17 and Schedule 5: Non-UK resident companies carrying on UK property businesses etc ........................................................................................................................ 71 Clause 18 and Schedule 6: Diverted profits tax ................................................................ 79 Clause 19: Hybrid and other mismatches: scope of Chapter 8 and “financial instrument” ........................................................................................................................... 81 Clause 20: Controlled foreign companies: finance company exemption and control 83 Clause 21: Permanent establishments: preparatory or auxiliary activities .................. 85 Clause 22 and Schedule 7: Payment of CGT exit charges ............................................... 87 Clause 23 and Schedule 8: Corporation tax exit charges ................................................ 90 Clause 24: Group relief etc: meaning of “UK related” company ................................... 94 Clause 25: Intangible fixed assets: exceptions to degrouping charges etc ................... 96 Clause 26 and Schedule 9: Corporation tax relief for carried-forward losses .............. 98 Clause 27 and Schedule 10: Corporate interest restriction ........................................... 103 1 Clause 28 and Schedule 11: Debtor relationships of company where money lent to connected companies ......................................................................................................... 108 Clause 29: Construction expenditure on buildings and structures ............................. 111 Clause 30: Special rate expenditure on plant and machinery ...................................... 110 Clause 31 and Schedule 12: Temporary increase in annual investment allowance .. 112 Clause 32: First-year allowances and first-year tax credits........................................... 115 Clause 33: First-year allowance: expenditure on electric vehicle charge points........ 116 Clause 34: Qualifying expenditure: buildings, structures and land............................ 117 Clause 35 and Schedule 13: Changes to accounting standards etc .............................. 118 Clause 36 and Schedule 14: Oil activities: transferable tax history ............................. 130 Clause 37: Petroleum revenue tax: post-transfer decommissioning expenditure ..... 144 Clause 38 and Schedule 15: Entrepreneurs’ relief .......................................................... 146 Clause 39: Gift aid etc: restrictions on associated benefits............................................ 152 Clause 40: Charities: exemption for small trades etc ..................................................... 154 Part 2: Other taxes .............................................................................................................. 155 Clause 41: Relief for first-time buyers in cases of shared ownership .......................... 156 Clause 42: Repayment to first-time buyers in cases of shared ownership ................. 159 Clause 43: Higher rates of tax for additional dwellings etc .......................................... 161 Clause 44: Exemption for financial institutions in resolution ...................................... 163 Clause 45: Changes to periods for delivering returns and paying tax ........................ 165 Clause 46: Stamp duty: transfers of listed securities and connected persons ............ 169 Clause 47: SDRT: listed securities and connected persons ........................................... 171 Clause 48: Stamp duty: exemption for financial institutions in resolution ................ 173 Clause 49: Stamp duty and SDRT: exemptions for share incentive plans .................. 176 Clause 50: Duty of customers to account for tax on supplies....................................... 177 Clause 51 and Schedule 16: Treatment of vouchers ...................................................... 178 Clause 52 and Schedule 17: Groups: eligibility .............................................................. 181 Clause 53: Rates of duty on cider, wine and made-wine .............................................. 184 Clause 54: Excise duty on mid-strength cider ................................................................ 186 Clause 55: Rates .................................................................................................................. 188 Clause 56: Tobacco for heating ......................................................................................... 190 2 Clause 57: VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc .......................................................................................................................................... 191 Clause 58: VED: taxis capable of zero emissions ........................................................... 193 Clause 59: HGV road user levy ........................................................................................ 195 Clause 60: Rates of duty from 1 April 2020 ..................................................................... 197 Clause 61: Remote gaming duty: rate .............................................................................. 198 Clause 62 and Schedule 18: Gaming duty ....................................................................... 199 Clause 63: Climate change levy: exemption for mineralogical and metallurgical processes .............................................................................................................................. 202 Clause 64: Landfill tax rates .............................................................................................. 204 Clause 65: Residence nil-rate band .................................................................................. 205 Clause 66: Application of penalty provisions ................................................................. 206 Clause 67: Isle of Man ........................................................................................................ 208 Part 3: Carbon emissions tax ............................................................................................. 210 Clause 68: Carbon emissions tax ...................................................................................... 211 Clause 69: Charge to carbon emissions tax ..................................................................... 213 Clause 70: “Reported carbon emissions” ........................................................................ 214 Clause 71: “Emissions report” and “reporting period” ................................................ 216 Clause 72: “Emissions allowance” ................................................................................... 218 Clause 73: Liability to pay carbon emissions tax ........................................................... 220 Clause 74: Power to make further provision about carbon emissions tax ................. 222 Clause 75: Consequential provision ................................................................................. 224 Clause 76: Interpretation ................................................................................................... 226 Clause 77: Regulations ....................................................................................................... 228 Clause 78: Commencement and transitional provision ................................................ 230 Part 4: Administration