All unincorporated businesses, including sole traders, the self-employed and trading partnerships, will be taxed on…
Taxation and other measures to be included in the Finance Bill for 2021-22 have now been announced.
The draft legislation largely covers pre-announced policy changes, along with accompanying explanatory notes, tax information and impact notes, as well as responses to consultations and other supporting documents.
The Government has also revealed three new policies that it will legislate for in the autumn:
- The exemption from income tax on payments for the COVID Winter Grant/Local Grant.
- Ensuring that the new Child Winter Heating Assistance and the Short Term Assistance social security payments made by the Scottish Government will not be subject to income tax.
- Ensuring that payments made by the London Capital & Finance Compensation Scheme will not be subject to Capital Gains Tax.
The main areas of the bill
Income Tax draft legislation: The proposal changes the basis period rules for unincorporated businesses from a ‘current year basis’ to a ‘tax year basis’. The transition would take place from 2022 to 2023. The changes would come into effect from 2023 to 2024.
A business’s profit or loss for a tax year would be the profit or loss that occurs in the actual tax year itself, regardless of its accounting date.
Increasing the normal minimum pension age for Pensions Tax: This introduces an age increase from 55 to 57 in 2028meaning pension savers will have to wait an additional two years to access their pensions without incurring an unauthorised payments tax charge unless they are retiring due to ill-health.
Pension Scheme Pays reporting – information and notice deadlines: This measure extends the information and notice deadlines for individuals to ask their pension scheme to settle their annual allowance charge of £2,000 or more, from a previous tax year. This will reduce their future pension benefits in a process known as ‘Scheme Pays’.
Taxation of asset holding companies in alternative fund structures
A qualifying asset holding company must:
- Be at least 70 per cent owned by diversely owned funds – these must be managed by regulated managers or certain institutional investors
- Exist to help move capital, income and gains between investors and underlying investments.
Real Estate Investment Trusts: The measure amends the tax rules that apply to Real Estate Investment Trusts. It also makes changes to conditions that a company must meet to be a UK Real Estate Investment Trust.
Corporation Tax: amendments to the hybrid and other mismatches rules: This sets out how to counter mismatches for payments to hybrid entities. These changes make sure the outcome is proportionate when relevant entities are seen as transparent in their home jurisdiction.
Capital allowances – amendment to statement for structures and buildings allowance: This amendment requires you to record additional information on your allowance statement. The amendment will make it easier for businesses to assess if they are entitled to structures and buildings allowance.
Insurance Premium Tax – identifying where the risk is situated: This moves the criteria for determining a location of risk for Insurance Premium Tax to primary legislation, to provide clarity for the insurance industry.
New proposals to clamp down on promoters of tax avoidance: The introduction of these new proposals will:
- Make sure promoters face tougher action to discourage them from operating
- Disrupt their activities
- Do more to support customers to steer clear of and leave tax avoidance arrangements.
Powers to tackle electronic sales suppression: New powers will reduce opportunities and decrease the existing use of electronic sales suppression, which is where businesses or individuals use technology to artificially reduce their reported sales and corresponding tax liabilities.
Large businesses – notification of uncertain tax treatment: Large businesses will need to tell HMRC if they adopt an uncertain tax treatment defined by HMRC notification criteria and subject to a monetary threshold set out in legislation.
Tracing and security for tobacco products: HMRC regulation-making powers will introduce tougher more visible street level sanctions to tackle tobacco duty evasion.
Link: Finance Bill 2021-22