Tax

On 6 July 2018 the UK government published draft legislation expected to form the Finance Bill 2019 (the “Draft Legislation”), together with accompanying explanatory notes, tax information and impact notes and other ancillary documentation.  Publishing the Draft Legislation in the Summer, months before the introduction of the next Finance Bill, forms part of the Government’s new Budget timetable, as set out in more detail in their December 2017 Policy Paper.

There are a broad range of matters covered by the Draft Legislation, many of which had been previously announced.  Among other measures, the Draft Legislation includes:

• The extension, from 6 April 2020, of the UK corporation tax regime to UK property income of non-UK tax resident companies which do not have a UK permanent establishment.
• The application, from 6 April 2019, of UK corporation tax and capital gains tax to gains derived by non-UK tax residents on the disposal of UK commercial (non-residential) property.
• Provisions to allow certain shareholders whose shareholding is reduced below 5% as a result of a commercial issue of shares, to elect to claim UK entrepreneur’s relief up to the date of dilution which should mitigate the current “cliff edge”.
• The introduction of new penalty regimes for the late submission of tax returns, the late payment of tax  and the deliberate withholding of certain information from HMRC.
• Amendments to the UK corporation tax “exit charge” rules to ensure those rules are compliant with EU rules.  It has also been announced that the UK will amend its controlled foreign company (CFC) regime to ensure compliance (although draft legislation has not yet been provided).
• Amendments to the UK corporate loss relief rules, interest deductibility restrictions and hybrid and other mismatch rules.
• Widening of the UK VAT rules to allow a non-corporate entity to join a VAT group (following a decision in the European Court of Justice).

While there were a number of expected changes conspicuous by their absence (including, for example, changes to the UK royalty withholding tax regime as regards the exploitation of intellectual property in the UK, legislation to address perceived abuse of insolvency arrangements, and a reform of the UK intangible fixed asset regime), the UK government has noted that it “will respond [on those matters] in due course”.

The Draft Legislation is open for consultation until 31 August 2018.  The Finance Bill will be published following the UK Budget which will itself take place sometime in Autumn 2018 (although no date has yet been set).