Weekly Tax Update - 12 December 2016

1. GENERAL

   1.1 Draft Finance Bill 2017 legislation and related documents

   Draft legislation for Finance Bill 2017 and related documents were issued on 5 December 2017.

   Personal tax measures include:

   draft legislation relating to the reform of the non-domicile rules, refinement of the business investment relief rules, and the bringing within the scope of UK IHT any overseas property whose value is derived from UK residential property. Our briefing note on these measures can be found at:www.smith.williamson.co.uk/uploads/publications/changes-taxation-of-non-doms-dec-16.pdf alignment of primary and secondary NIC thresholds from 6 April 2017, and with income tax at the upper end, but not at the lower end; from 6 April 2017, the end of the requirement to deduct tax on interest payments for OEIC's, AUT's, investment trusts and peer to peer lending platforms; the personal allowance and higher rate thresholds for 2017/18 to be £11,500 and £45,000 respectively; from 6 April 2017, performance fees will no longer be deductible from offshore fund income, but instead will be deductible for CGT purposes; reform of the taxation of life assurance products from 6 April 2017; ISA limits increased to £20,000 from 6 April 2017 (junior ISAs and child trust funds to £4,128); from the date of Royal Assent of Finance Bill 2017, the range of permitted investments that do not trigger the personal portfolio bond rules will be revised to include UK real estate investment trusts, overseas equivalents of investment trust companies and authorised contractual schemes. There will also be a power to amend the list of approved categories of investments; and for EIS and SEIS shares issued on or after 5 December 2016 will no longer be excluded from qualifying if a right exists to convert the shares from one class to another at some future date (as long as the right is not exercised during the holding period). Some refinements are also made to the VCT follow- on funding rules from 6 April 2017. Business tax measures include:

   the reform of corporate loss relief from 1 April 2017; the restrictions applying from 1 April 2017 to corporate interest tax deductions above a £2m net interest threshold. The draft legislation on the public interest benefit exception and a number of other aspects, is not yet available; a relaxation of the substantial shareholdings exemption for disposals on or after 1 April 2017. This includes: - Removal of the condition that the investing company is required to be a trading company or part of a trading group; Relaxation of the condition that the investment must have been held for a continuous period, as a minimum, from 12 months in the 2 years preceding the sale to a continuous period of 12 months in the 6 years preceding the sale; Withdrawal of the condition that the company in which the shares are sold should continue to be a qualifying company immediately after the sale, unless the sale is to a connected party. Removal of the condition that the company in which the shares are sold is a trading company, for a class of investors defined as qualifying institutional investors. The legislation contains a list of qualifying institutional investors. refinements to target better the patent box and hybrid mismatch rules; legislation for the previously announced and forthcoming re-scoping of the bank levy; the ability of SMEs to access the Northern Ireland corporation tax rate on the same basis as large companies; legislation to prevent the future use of disguised remuneration schemes by the self-employed to have effect from 6 April 2017; and abolition of Class 2 NIC from April 2018. Employment tax and pension measures include:

   restrictions on the range of benefits that can be the subject of salary sacrifice arrangements from 6 April 2017, with transitional periods for existing arrangements; the money purchase annual allowance for pensions will be reduced from £10,000 to £4,000 from April 2017; from 6 April 2017, the taxation of foreign pensions and lump sums will be brought into line with the taxation of other UK pensions for UK resident individuals, along with an extension of UK taxing rights on pension exporting from 5 years to 10 years; from April 2018 termination payments in excess of £30,000 will attract employer's NIC; legislation concerning off-payroll working in the public sector that will impact payments made on or after 6 April 2017; and from April 2017, the denial of an employer's tax deduction for payroll costs where incurred in relation to certain disguised remuneration arrangements, unless any associated PAYE and NIC charges are paid within a 12 month period. VAT and indirect tax measures include:

   with effect from 1 April 2017 a new 16.5% VAT flat rate for all 'limited costs'...