Some proposed changes which were announced by the Chancellor in the 2016 Budget and Autumn Statement and which appeared in our previous summaries are due to be enacted.
Income Tax: Benefits in kind
Draft Finance Bill 2017 clauses having effect from the 2017-18 tax year allow an employee to make a payment in return for a benefit in kind and reduce the taxable value of the benefit as long as the payment is made by 6 July in the following tax year.
There are also draft clauses clarifying existing legislation so that employees will only be taxed on business assets for the period the assets are made available for private use and removing the tax charge on certain legal costs and costs of pension advice borne by employers.
Income Tax: Property and trading income allowance
The draft Finance Bill 2017 introduces two new income tax allowances of £1,000 each for property and trading income. Individuals with income below the level of the allowances will no longer need to declare or pay tax on that income. If income exceeds the relevant allowance then the individual may choose to pay tax on the amount by which income exceeds the allowance. The trading income allowance will also apply to certain income from providing services or assets.
Income Tax and National Insurance: Salary sacrifice schemes
The proposed changes affecting salary sacrifice schemes or “optional remuneration arrangements have been announced and will be included in Finance Bill 2017. The new measures, to take effect from the 2017-18 tax year, are intended to ensure that most benefits provided as part of a salary sacrifice scheme will be treated the same as cash income. Pensions, pension advice, childcare, cycle to work schemes and ultra-low emission cars will be exempt from the new rules. Arrangements in place before April 2017 will be protected from the new rules for up to a year and arrangements involving cars, accommodation and school fees will be protected for up to four years.
Taxation of investments
Draft Finance Bill 2017 clauses will allow taxpayers to apply for a recalculation of “wholly disproportionate” taxable gains arising on some surrenders and assignments of life insurance policies. If successful, the gain will be recalculated on a just and reasonable basis.
Income Tax and Capital Gains Tax: Tax-advantaged venture capital schemes
Draft Finance Bill 2017 clauses include clarification of the pre-arranged exit rules for Enterprise Investment Schemes and Seed Enterprise Investment Schemes. There are also changes to the rules for certain follow-on investments in Venture Capital Trusts with effect from 6 April 2017.
Income Tax and Capital Gains Tax: Employee shareholder status
Draft Finance Bill 2017 clauses confirm that new issues of employee shareholder shares no longer qualify for income tax and capital gains tax reliefs and exemptions
Corporation Tax: Patent Box
Draft Finance Bill 2017 clauses include detailed rules dealing with the tax treatment of costs incurred by two or more companies carrying out research and development under a “cost sharing arrangement”.
Corporation Tax: Contributions to grassroots sport
Draft Finance Bill 2017 clauses include a new tax relief for certain contributions to grassroots sport from 1 April 2017.
Draft Finance Bill 2017 clauses confirm that expenditure incurred on charging points for electric vehicles will qualify for a 100% first-year allowance. The allowance is available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.