25 May 2016

Possible delay in enactment of reduction in the SCT rate to 10%

The enactment of the reduction in Supplementary Charge rate to 10% announced at Budget 2016 is probably delayed until the autumn.

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  • The progress of Finance Bill is delayed by EU Referendum
  • The timing of the report stage and the third reading (when the change can be accepted as substantively enacted) in the House of Commons is not yet known
  • The effect of the new rate cannot be reflected in the accounts until the rate has been substantively enacted
  • For accounting purposes, tax balances may not be able to be re-calculated using the new rate in the September quarter results such that recognition would be delayed to the December quarter results.

If you think this could affect your business and you would like to understand more details please get in touch:

Here’s the detail:

Possible delay in enactment of reduction in the SCT rate to 10%

We understand that the government has indicated that the progress of the Finance Bill may be delayed by the EU referendum and therefore may not receive Royal Assent before Parliament rises for the summer recess on 21st July.

MPs passed a “carry over” motion in respect of the Bill on 11 April, to enable it to continue to be debated in the new term of Parliament which commences on 5th September.

However there will be less than two weeks before Parliament rises again for the conference season on 15th September, resuming on 10th October.

The Finance Bill has had its second reading and the next step is the Committee stage, but this has not yet been scheduled. Similarly the timing of the report stage and the third reading in the House of Commons is not yet known. This is important as the Report stage/third reading is when the bill would be treated as substantively enacted.

It is therefore conceivable that the Finance Bill may not gain Royal Assent before 21st July or indeed that it will be as substantively enacted before this date.

If this happens it is also possible that it may not get Royal Assent before the end of September and again it is possible that substantive enactment might be delayed until after this date.

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Given the Provisional Collection of Taxes Act only allows measures which came into force on Budget Day to remain effective for seven months, the Bill must become law prior to 16th October to avoid those measures lapsing but this only acts as a back stop.

What this means is that there is a possibility that it would not be possible to reflect the recent reduction in the SCT rate for accounting purposes in the September quarter results such that recognition would be delayed to the December quarter results.

Please contact us if you would like to discuss how this could effect your business or have any questions.