The Finance Bill as originally introduced has been dramatically reduced in scope in order to pass into law prior to the general election.
For companies the key points are the omission of;
- the new loss relief rules (for brought forward losses),
- the interest deduction restrictions, and
- the amendments to the Substantial Shareholding Exemption rules.
In addition, the legislation dealing with the relaxation of the PRT opt-out rules is to be omitted.
The Government minister stated in the relevant Finance Bill debate that the withdrawal of all of these provisions should not be taken as a change of policy and it is expected that all these measures will be enacted in legislation to be introduced after the election, regardless of which party forms the next government.
As a reminder, the proposed new rules for loss relief largely reflected the stated policy intention that the treatment of Ring Fence trade losses should be preserved, although we identified a number of anomalies in the loss rules. The interest restriction rules were drafted to exclude interest taken into account in computing Ring Fence profits and would only therefore impact non-ring fence profits.
The decision not to force through the loss rules as drafted is welcome as it will permit our representations to be considered properly.
In the original Bill the operative date for the first three sets of measures was 1/4/17, and we would expect any reintroduced legislation to apply from this date. However, the possibility of a later operative date, or indeed the possibility that one or other measures is not brought in, should not be discounted.
Please contact us to discuss any concerns you have.
HMRC have already accepted elections made under the proposed amended PRT opt out rules and we assume that they will continue to honour these until the legislative position is finalised.
In the meantime, the reduced Bill maintains the machinery for income tax and corporation tax, indirect tax rates, and retains some non-controversial anti- avoidance measures with regard to personal and employee taxes; for example, rules combatting the tax savings hitherto enjoyed by the use of salary sacrifice schemes and foreign pensions as alternatives to paid remuneration and UK pensions.