Cuts in the dividend tax, changes to the pensions lifetime allowance and a raft of anti-avoidance and anti-evasion measures, particularly targeted at proponents of aggressive tax schemes and those using offshore bank accounts to conceal money, as well as new powers for HMRC, form the bulk of the draft legislation for Finance Bill 2016
The government has published a raft of consultations, technical notes and draft tax legislation to implement tax policies published at Summer Budget 2015 and Autumn Statement 2015 set for introduction in Finance Bill 2016.
The big push is to further clamp down on tax evasion with the introduction of tough anti-offshore tax legislation including criminalising those using undeclared offshore accounts, greater powers for HMRC to investigate tax under-declarations and measures to improve large business tax compliance.
New powers for HMRC are outlined under a new ‘simple assessment’ provision which allows the tax authorities to probe taxpayers and trusts which it believes are not declaring income tax and capital gains tax liabilities, targeted at those who do not submit a self assessment return (details here). There is also a raft of measures to improve large business tax compliance.
Changes to dividend taxation will come into force from 6 April 2016 designed to raise up to £2.7bn in 2016-17. The introduction of the dividend tax credit will be replaced by a new dividend allowance in the form of a 0% tax rate on the first £5,000 of dividend income per year.
This means that anyone with dividend income over £5000 per year, or those who pay themselves dividends in place of salary, will pay more tax. Details are available here
On pensions, the reduction in the standard lifetime allowance to £1m for the 2016-2017 tax year onwards go ahead as planned and will be increased annually in line with the Consumer Prices Index from 2018 to 2019 onwards.
Transitional protection (‘fixed protection 2016 and individual protection 2016’) will be introduced to provide individuals with pension savings of up to £1.25m protection from retrospective taxation, subject to certain conditions. See the TIIN here
Dropped in the run-up to the general election due to a limited time for legislation, the government is pushing ahead with plans to introduce a statutory exemption to exempt from income tax and NICs low-value benefits in kind (BIK) which meet certain qualifying conditions, including a £50 limit per individual BIK. Qualifying ‘trivial’ BIKs provided to directors or other office holders of close companies, or to members of their families or households, will be subject to an annual cap of £300.
It has also issued draft legislation for changes to the annual wear and tear allowance for fully furnished properties with the introduction of a relief that enables all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings, appliances and kitchenware in the property,. Details here
Employee share schemes will also be simplified with legislation set for Finance Bill 2016. This will clarify the tax treatment for internationally mobile employees of certain employment-related securities (ERS) and ERS options; this will come into force on 6 April 2016. Any charge to tax will arise under the rules that deal with ERS options, rather than earnings. See details here
From April 2017, income from sporting testimonials and benefit matches for employed sportspersons, irrespective of whether they are arranged by the sportsperson’s club or by an independent testimonial committee, is liable for income tax under PAYE.
This will apply where the testimonial is granted or awarded on 25 November 2015 or later, and only to ‘events’ that take place after 5 April 2017.
An exemption will be available under the new legislation for the employed sportsperson of up to £50,000 of the income received, either from an individual match or a series of events in a testimonial year. The TIIN is available here
In the mass of supporting documents released as part of Legislation Day, the government has committed to confirming the majority of measures for inclusion in the Finance Bill at least three months prior to introduction of the Bill itself and, where possible, to publish draft legislation for each of these measures. However, there is a caveat that’ the final contents of Finance Bill 2016 will be subject to confirmation at Budget 2016’.
A useful overview of the draft legislation, policy documents and TIINs is available here