Finance Bill 2022-23: Draft Legislation and Tax Documents

In line with the tax policy making framework, the Government are publishing draft legislation ahead of potential inclusion in Finance Bill 2022-23. This allows for technical consultation and provides taxpayers with predictability over future tax policy changes. Alongside this, the Government are making announcements in a small number of technical areas of tax policy to support the operation of the tax system. Draft legislation is being published to seek stakeholder views at this stage. The final contents of Finance Bill 2022-23 will be a decision for the Chancellor at the next Budget. The Government are also publishing a number of tax-related consultations and summaries of responses to consultations which have already been conducted.

The Government are publishing draft legislation and associated documents, further to previous announcements, including at Budget or in “Tax Administration and Maintenance: Autumn 2021” [CP 577], published on 30 November 2021:

R&D tax relief reforms: The Government are publishing draft legislation which will amend the definition of qualifying expenditure to include data and cloud costs. These changes will ensure the reliefs support modern innovation. The draft legislation will also refocus the reliefs towards research & development (R&D) in the UK and implement measures to improve compliance. The Government will limit overseas spending on subcontracted R&D and externally provided workers, with some limited exceptions. These changes will ensure the reliefs provide better targeted support for innovation in the UK.

OECD pillar 2 reforms: The Government are publishing draft legislation and a summary of responses to the consultation on the implementation of pillar 2 in the UK. This builds on the historic agreement of 137 countries to the Organisation for Economic Co-operation and Development’s (OECD’s) two pillar solution to the tax challenges of a globalised and digital economy. Pillar 2 will ensure that multinational enterprises pay a minimum 15% rate of tax in each jurisdiction that they operate in.

Air passenger duty reform: The Government are publishing draft legislation which will implement reform to air passenger duty (APD), as announced at autumn Budget 2021. These reforms aim to bolster UK air connectivity through a 50% cut in domestic APD and further align the tax with UK environmental objectives by adding a new ultra-long-haul distance band.

Homes for Ukraine sponsorship scheme: The Government are publishing draft legislation which introduces new and temporary reliefs from the annual tax on enveloped dwellings (ATED) and 15% rate of stamp duty land tax (SDLT) where a corporate entity makes a dwelling available to Ukrainian refugees under the homes for Ukraine sponsorship scheme, as announced in a written ministerial statement on 31 March 2022.The payments individuals, community groups and businesses receive under this scheme will be exempt from either income tax or corporation tax. Therefore, it will ensure that those wishing to offer accommodation do not face any unfair obstacles or immediate tax burdens.

Pensions: Relief relating to net payment arrangements—The Government are publishing draft legislation which will provide the. basis for HMRC to make top-up payments directly to low-earning individuals saving in pension schemes using a net pay arrangement from 2024-25 onwards, as announced at autumn Budget 2021. These top-ups will help to better align outcomes with equivalent savers saving into pension schemes using relief at source.

Improving the administration of insurance premium tax (IPT): The Government are publishing draft legislation to improve the administration of IPT, as announced at tax administration and maintenance day 2021 (TAM Day 2021). This measure will provide HMRC with powers to make a statutory instrument to move insurance premium tax forms from secondary legislation into a public notice.

Collective money purchase pension scheme: As announced in a written ministerial statement on 21 February 2022, the Government always intended that certain payments made instead of a pension from a collective money purchase pension scheme in the process of winding up should not attract pensions tax charges. However, there are instances where the current legislation may not achieve the intended outcome. This draft legislation clarifies the tax legislation to ensure that a collective money purchase pension scheme that is in the process of winding up can make certain types of payments without attracting pension tax charges.

Relief on disposals of joint interests in land: The Government are publishing draft legislation to make changes to the legislation for capital gains tax roll-over relief and private residence relief to ensure that limited liability partnerships and Scottish partnerships which hold title to land are included, as announced at TAM Day 2021.

Transfer pricing documentation: Master File / Local File: As announced at TAM Day 2021, the Government are publishing draft legislation which will make it a requirement for large multinational businesses operating in the UK to keep and retain transfer pricing documentation in a prescribed and standardised format, set out in the OECD’s transfer pricing guidelines, giving businesses certainty on the appropriate format and documentation they need to keep.

Tax conditionality: licenses in Scotland and Northern Ireland: As announced at TAM Day 2021, this draft legislation will make licence renewal applications in Scotland and Northern Ireland for taxi and scrap metal licences conditional on completing a tax check with HMRC to ensure the applicant is appropriately registered for tax. This change applies for licence renewals from April 2023 and extends the approach already in place for licences issued in England and Wales.

Aggregates levy reform: As announced at TAM Day 2021, the Government are publishing draft legislation to make changes to aggregates levy exemptions, by replacing four exemptions for by-product aggregate arising from specific types of construction with one broader, more general exemption. It will also restrict an exemption so that aggregate extracted on a construction site specifically for construction use is taxed in the same way as other construction aggregate.

Government are also publishing draft legislation and associated documents in the following areas which have not been previously announced:

Soft drinks industry levy (SDIL): concentrates mixed with sugar when dispensed: The Government are publishing draft legislation which closes a minor loophole and will ensure that all soft drinks meeting the SDIL sugar content condition that are dispensed from fountain machines are within the scope of the levy.

Further tax provisions in connection with the dormant assets scheme: The dormant assets scheme is being expanded to include eligible assets from the pensions, insurance, investment and wealth management, and securities sectors. The Government have therefore published draft legislation to ensure that payments from an authorised reclaim fund are treated for the purposes of income tax as if they were from the pension asset that was initially transferred. It also ensures that where an asset has been transferred to an authorised reclaim fund and its owner was alive at the time of transfer but subsequently dies before the asset has been reclaimed, the owner will be treated for inheritance tax purposes as still owning the original asset.

Taxation of lump sum exit scheme payments: As announced in the lump sum exit scheme (LSES) consultation response, this draft legislation provides clarity that LSES payments will be treated as capital in nature and will be subject to capital gains tax, or corporation tax in the case of incorporated entities.

Chargeable gains: Separating spouses and civil partners: The Government are publishing draft legislation which provides that the transfer of assets between spouses and civil partners that are separating are made on a no gain/no loss for up to three full tax years after the parties cease to live together. This follows on from a recommendation by the Office of Tax Simplification.

Changes to the qualifying asset holding companies rules: The Government are publishing draft legislation which intends to make limited changes to its qualifying asset holding companies regime, which went live in April 2022. These changes will ensure that the regime is available to a broader range of investment structures, consistent with the original policy rationale and subject to safeguards. It is intended that the existing anti-fragmentation rule in paragraph 4 of schedule 2, Finance Act 2022 will be extended with effect from today so that it also applies where interests are held through one or more QAHCs as well as directly in the company concerned.

Approval regime for aerodromes not customs and excise designated: The Government are publishing draft legislation which makes an amendment to establish an approval regime for aerodromes that handle international flights, and which are not customs and excise designated airports. This will facilitate a fairer system which will strengthen both aerodrome operator accountability and border control provisions.

The Government are also announcing the following measure which will take immediate effect from today and publishing draft legislation:

Double taxation relief: time limit for claims: Legislation will be introduced to restrict certain claims for double taxation relief. No extended time limit claims will be allowed in relation to amounts calculated by reference to the foreign nominal rate of tax, unless the relevant accounting period is under enquiry, or there has been an actual adjustment of UK or foreign tax within the last six years. This change will only affect certain double taxation relief claims in relation to distributions received by UK companies in previous years and will protect tax revenue in respect of such distributions.

All draft legislation is accompanied by a tax information and impact note (TIIN), an explanatory note (EN) and, where applicable, a summary of consultation responses document.

The Government are also publishing the following consultations:

Improving the data HMRC collects: Under the current system, HMRC collects data from taxpayers and employers via tax returns to administer the tax system and inform Government decision making. The Government are consulting on a number of options for additional data for HMRC to collect, use, and safely share across Government, and how this can be done in a way that minimises any extra burden for customers. This will help ensure the information the Government hold is more accurate, bring direct benefits to businesses and taxpayers, provide better insights for policymaking and support Government aim to build a trusted, modern tax administration system.

Digitalising Business Rates: Connecting business rates and tax data: The way that the business rates system currently operates makes it difficult for the Government to precisely target support when responding to the needs of businesses. Digitalising Business Rates (DBR) aims to join together business rates data held across different parts of Government—billing authorities, the VOA and HMRC—with tax data. By bringing together businesses’ property data and tax information in one place, the Government will be better able to design and apply reliefs to support businesses that are most in need, rather than having to rely on property information in isolation. This consultation lays out and seeks views on options for the policy and IT design for the DBR project.

The Government are also publishing summaries of responses to the following discussion documents and consultations:

“Preventing and collecting international tax debt”

“Helping Taxpayers Get Offshore Tax Right”

“IFRS 17 (new international accounting standard for insurance contracts)”

“ITSA registration for the self-employed and landlords”

“OECD Model Rules for Digital Platforms (MRDP)”

All publications can be found on the gov.uk website. The Government’s tax consultation tracker has also been updated.

At autumn Budget 2021, the Government plans for alcohol duty reform were announced and a consultation on the detail of those planned reforms was published. The consultation closed on 30 January 2022. The Government are considering the feedback received and will respond in the autumn.

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