2018 Budget & Finance (No.3) Bill 2017-19

Introduction

Each year the Chancellor of the Exchequer presents the Budget, which contains all the tax measures for the year ahead. Traditionally the Budget has been in March, prior to the start of the tax year on 6 April. The statutory provisions to give effect to these tax measures are set out in a single Bill: the annual Finance Bill.

It has been the practice in recent years for Chancellors to make tax announcements twice a year, using the Pre-Budget Report or Autumn Statement as a second fiscal event. In his Autumn Statement on 23 November 2016 the Chancellor Philip Hammond announced that from autumn 2017 the Government would present a single autumn Budget, to allow for greater Parliamentary scrutiny of Budget measures ahead of their implementation. For details see, The Budget and the annual Finance Bill, Commons Library briefing CBP813, 5 November 2018.

Budget 2018

On 29 October 2018 Mr Hammond presented the Conservative Government’s fifth Budget.[1]

The Budget report - HC 1629 - and associated documents are collated on Gov.uk. Three key sources are:

• the Treasury’s Policy Costings document;
• the Treasury’s Impact on Households document, and,
• the series of Tax Information and Impact notes published by HMRC, dealing with each of the tax measures announced, collated in the Overview of Tax Legislation & Rates document published by Treasury & HMRC.

Commons Briefing Papers are available on the context for the Autumn Budget (CBP 8422, 23 October 2018), and a summary of the measures announced (CBP 8428, 29 October 2018). The Lords Library has also published a paper on the Budget (LLN 2018-0114, 7 November 2018).

The Institute for Fiscal Studies published its post-Budget briefing on 30 October. The Treasury Committee has an ongoing inquiry on the Budget; details are on its site.

Finance Bill (No.3) Bill 2017-19

The Finance (No.3) Bill 2017-19 was published on 7 November 2018[2]. The Treasury has also published the explanatory notes to the Bill, and collates other relevant material on this page. As noted, the Bill received its Second Reading on Monday 12 November.

As is common practice, the Government published a series of draft provisions to be included in the Finance Bill 2018/19 some months before the Budget, on 6 July. Some of these follow earlier consultation exercises, others provide for certain technical changes, while a third group are to have immediate or retrospective effect (Written Statement HCWS834, 6 July 2018). This draft legislation is on Gov.uk; HMRC published tax information & impact notes on each of these measures.

Generally selected clauses from the Bill are debated by the Committee of the Whole House over two days at the start of the Bill’s Committee stage. The selection of clauses is set out in a programme motion, which was agreed at the conclusion of the Bill's Second Reading on 12 November 2018 (HC Deb cc 54-148). These are listed below, with links to the relevant tax information & impact notes for each:

Clauses 5, 6, 8, 9 and 10 (income tax thresholds and reliefs)

Income Tax Personal Allowance and basic rate limit from 2019 to 2020, 29 October 2018

Workplace charging for all-electric and plug-in hybrid vehicles, 6 July 2018

Changes to the treatment of emergency vehicles for private use, 6 July 2018

Abolition of receipt checking for benchmark scale rates and changes to overseas scale rates, 6 July 2018

Clause 15 and Schedule 3 (offshore receipts in respect of intangible property)

Offshore receipts from intangible property, 29 October 2018

Clause 16 and Schedule 4 (avoidance involving profit fragmentation arrangements)

Tax avoidance involving profit fragmentation for Income Tax and Corporation Tax, 7 November 2018

Clause 19 (hybrid and other mismatches: scope of Chapter 8 and “financial instrument”)

Corporation Tax changes for hybrid and other mismatches regime, 29 October 2018

Clause 20 (controlled foreign companies: finance company exemption and control)

Controlled Foreign Companies and EU Anti-Tax Avoidance Directive, 7 November 2018

Clause 22 and Schedule 7 (payment of CGT exit charges)

Deferral of exit charge payments for Capital Gains Tax, 6 July 2018

Clause 23 and Schedule 8 (corporation tax exit charges)

Changes to the Corporation Tax exit charges, 6 July 2018

Clause 38 and Schedule 15 (entrepreneurs’ relief)

Minimum qualifying period extension for Entrepreneurs’ Relief, 30 October 2018

Changes to personal company tests for Entrepreneurs’ Relief, 29 October 2018

Entrepreneurs’ Relief where shareholding ‘diluted’ below the 5% threshold, 6 July 2018

Clauses 39 and 40 (gift aid and charities)

Simplification of donor benefits rules for Gift Aid, 6 July 2018

Increases to charities’ small trading exemption limits, 29 October 2018

Clauses 41 and 42 (stamp duty land tax: first-time buyers in cases of shared ownership)

, 29 October 2018

Clauses 46 and 47 (stamp duty and SDRT)

Stamp Duty, Stamp Duty Reserve Tax transfers of listed securities and connected persons, 7 November 2018

Clauses 61 and 62 and Schedule 18 (remote gaming duty and gaming duty)

Remote Gaming Duty increase, 29 October 2018

Changes to Gaming Duty accounting periods and administration of the tax, 31 October 2018

NB : Following the Government's written statement on 14 November 2018 regarding its decision to implement the cut in the stakes for B2 gaming machines from April 2019 (HCWS1089), the Treasury tabled amendments to clause 61 for consideration by the Committee of the Whole House.

Clauses 68 to 78 (carbon emissions tax)

Carbon Emissions Tax, 29 October 2018

Clause 83 (international tax enforcement: disclosure arrangements)

International Tax enforcement disclosable arrangements, 6 July 2018

Clause 89 (minor amendments in consequence of EU withdrawal)

Amendments to tax legislation to reflect EU exit, 29 October 2018

Clause 90 (emissions reduction trading scheme: preparatory expenditure)

Carbon Emissions Tax, 29 October 2018

This two-day debate occurred on Monday & Tuesday 19-20 November 2018.

Government amendments tabled to clause 61 (remote gaming duty) were agreed. In addition, the House agreed three new clauses and one amendment, tabled by the SNP and the Labour Party, without a division:

• New Clause 12, to require a review of the public health effects of the provisions in the Bill relating to remote gaming duty - tabled by the SNP (HC Deb 20/11/2018 cc757-779).
• Amendment 23 to clause 83 (internatlonal tax enforcement: disclosable arrangments), to require a report on how the power under this provision is to be exercised in the case of either a negotiated withdrawal agreement from the EU or a 'no-deal' Brexit - tabled by the Labour Party.
• New Clause 5, to require a review of the impact of the tax avoidance provisions in the Bill, with regards to child poverty, households on different levels of income, people with protected characteristics and on a regional basis - tabled by the Labour Party.
• New Clause 14, to require a review of the effectiveness of the tax avoidance provisions in the Bill - tabled by the SNP (HC Deb 20/11/2018 cc779-833).

The remainder of the Bill was considered by Public Bill Committtee over nine sittings from 19 November to 11 December 2018. The Government tabled one minor amendment to Clause 13, Schedule 1 of the Bill (Disposals by non-UK residents etc) - an explanatory note was published by the Treasury. This was agreed without a division. Over these proceedings the Committee considered a number of amendments and new clauses tabled by the Opposition, but none of these were agreed, and were either withdrawn or rejected following a vote.

The Bill's Report Stage and Third Reading were completed on Tuesday 8 January 2019. The Government tabled amendments to two provisions in the Bill: clause 38 & Schedule 15 (Entrepreneurs relief) and clause 25 (Intangible fixed assets), as well as one new clause & Schedule: New clause 6 and new Schedule 1 (Intangible fixed assets: restrictions on goodwill and certain other assets). Explanatory notes to these amendments, and a tax information & impact note to the new clause have been published by the Treasury. These were agreed without a division. In addition one amendment, and one new clause, were agreed:

• Amendment 7 to clause 89 (minor amendments in consequence of EU withdrawal), to prevent the Government implementing this provision - which allows for changes to be made by secondary legislation to tax legislation to maintain its effect in the event of a 'no deal' Brexit (see HMT letter to Chairman of Ways & Means, 16/11/2018) - without the explicit consent of Parliament for such an outcome. The amendment was tabled by Yvette Cooper (Chair of the Home Affairs Select Committee), and agreed to on division (by 303 votes to 296).
• New Clause 26, to require the Government to review the changes to be made by clauses 79-80 of the Bill (which increase the tax assessment time limit for non-deliberate offshore non-compliance), and compare them with other time limits placed on HMRC's recovery of unpaid tax, including the 2019 Loan Charge (introduced by Schedules 11-12 of F(No.2)A 2017). The new clause was tabled by Sir Edward Davey (Liberal Democrat), and agreed without a division.

The Bill completed its (formal) scrutiny in the Lords on 7 February, and in turn the Finance Act 2019 received Royal Assent on 12 February.

Library briefing material on the Finance Bill

It is long-standing practice for there not to be a single impact assessment on the Bill; as noted, HMRC publish tax information & impact notes on individual Budget measures (see PQ6549, 6 September 2017). Similarly, given the scale and scope of the annual Finance Bill, the Library does not publish a single paper on the Bill, but aims to publish briefing material relating to the clauses selected for debate by the Committee of the Whole House.

• Tax avoidance and tax evasion, CBP7948, 11 February 2019
• Stamp duty land tax on residential property, CBP7050, 9 November 2018
• Fixed-odds betting terminals, CBP6946, 14 November 2018
• Brexit: energy and climate change, CBP8394, 9 November 2018
• Capital gains tax: recent developments, CBP5572, 11 November 2018
• Income tax: increases in the personal allowance since 2010, CBP6569, 15 November 2018

and of related interest to the last of these:

• Income tax: the additional 50p rate, CBP249, 26 September 2018

Notes :

[1] HC Deb 29 October 2018 cc653-669. The Chancellor had announced the date of the Budget on 26 September (HM Treasury press notice, Budget 2018 date confirmed, 26 September 2018).

[2] The date for the Bill's publication was confirmed last month: Finance (No.3) Bill: Written Statement, HCWS1002, 15 October 2018