A second draft of the Finance Bill 2017 was introduced in September following the first draft released earlier in the year. The government used this second version to reintroduce measures that had been taken out of the earlier, shorter draft following Theresa May’s decision to call a snap election.
The new draft includes new penalties for those who allow the use of tax avoidance schemes which are subsequently defeated by HMRC, and changes to prevent artificial schemes being used by individuals to avoid paying the tax owed on their income. The rules surrounding company interest expenses have also been updated to ensure excessive interest payments can’t be used by big businesses to reduce their tax payments.
The new Bill ensures that people who have lived in the UK for many years pay tax to HMRC in the same way as UK residents through the abolition of permanent non-dom status. The dividend allowance has also been reduced from £5,000 to £2,000 effective from April 2018, a move which will bring the tax treatment of people working through their own company and those who are self-employed or employees further in line with each other. The Money Purchase Annual Allowance has also been lowered from £10,000 to £4,000 in order to limit an individual’s ability to recycle pension savings in order to receive additional tax relief.
As these are all measures which were dropped from the Finance Bill before the election in June, the Finance Bill is unlikely to have held any surprises for many people. The only measures which have been dropped are two clauses on Customs enforcement powers and a third on landfill tax. It is expected that the third Finance Bill of 2017, due in December, will contain significant landfill tax proposals following announcements made in September. Also of note in the Bill are clauses looking ahead to Making Tax Digital, with digital tax returns currently likely to become mandatory from 2020.