- allow the National Employment Savings Trust (NEST) to register with HMRC for tax purposes, and to be subject to the same tax rules as other tax-registered pension schemes;
- remove the tax liability on any interest charges on late pension contributions made by an employer to qualifying pension schemes;
- provide a regulation-making power to deal with any unintended tax consequences that may merge as a result of the implementation of NEST and the employer duties and compliance as set out in the
Pensions Act 2008; and
- remove the tax charge on borrowing linked to the cost of establishing and operating a registered pension scheme, subject to conditions.
The changes will have effect on and after the date that the legislation receives Royal Assent.
The Government intends to introduce a technical relaxation of one aspect of the rules for employer-provided childcare.
The tax exemption is available only where childcare is made available to all employees (whether or not they need it or choose to take up the offer). A particular difficulty has been identified in relation to salary sacrifice schemes where some individuals might not be able to take up the offer of childcare as the loss of actual salary would take their income below the level of the national minimum wage. Strictly, if such individuals are thereby barred from accepting the offer of employer-provided childcare, the conditions are not met and the provision for all other employees would be a taxable benefit.
The proposed amendment, to be introduced
as soon as possible in the next Parliament but with retrospective effect to 6 April 2005, will relax the
available generally requirement in the case of relevant low-paid employees where the childcare is provided (whether by voucher or directly) through a salary sacrifice scheme.
Following informal consultation, it has been decided that carers who take on legal parental responsibility for a child should be taxed in the same way as adopters. Legislation will therefore be introduced in a Finance Bill in the next Parliament to exempt certain payments made to special guardians, and to certain carers looking after children under a residence order, from income tax.
The change will have effect for payments received on or after 6 April 2010.
The Finance Act 2008 included a provision that any foreign income or gains of an individual taxable on the remittance basis remitted to the UK by way, or for the benefit of, any
relevant person are taxed on the individual.
The current definition of a relevant person includes, among others, close companies and their subsidiaries in which such persons are participators. To remove uncertainty, the Finance Bill 2010 will make it clear that references to a close company in this context include subsidiaries of non-resident companies which would be close companies if they were resident in the UK.
The change will have effect on or after 6 April 2010.
An anti-avoidance measure is to be introduced to combat a stated abuse in relation to share incentive plans (SIPs). The measure will have effect in relation to payments made and alterations to share capital or rights attached to shares taking place on or after 24 March 2010.
The provision will apply where companies pay money to SIP trustees to buy shares from director-shareholders but where no real value is transferred to employees under the SIP. In such cases, where a main purpose of the payment is to obtain a corporation tax deduction, that deduction will not be allowed. The measure will not affect payments made with the purpose of genuinely enabling employees to obtain shares under the SIP.
HMRC may withdraw approval of a SIP if the value of shares is materially affected by alterations to the share capital or to rights attaching to the shares. The legislation will be amended to clarify that HMRC may withdraw approval of a SIP even if there are no participants, or where no shares have been awarded under it, at the time of such alteration.
Anti-avoidance measures will to be introduced in the Finance Bill 2010 to counter arrangements being used to circumvent the financial limit in Company Share Option Plans (CSOP). The measures will mean that CSOP share options can no longer be granted over shares in a company which is under the control of a listed company.
The new rules will have effect in relation to options granted over shares in a company which is under the control of a listed company on or after 24 March 2010.
Following consultation, the transactions in securities rules applying for income tax purposes are to be replaced with clearer legislation targeted more effectively at arrangements involving tax avoidance. Importantly, the new legislation will make clear how the tax advantage is to be quantified. The new income tax advantage test, and the introduction of new exemptions covering fundamental changes in ownership of close companies, are expected to mean that the rules will apply to fewer individuals than before.
It would appear that no changes will be made at this stage to the transactions in securities rules applying for corporation tax purposes.
Legislation will be included in the Finance Bill 2010 and will apply with effect for transactions where the tax advantage is obtained on or after 24 March 2010.
A new 100 per cent first-year allowance is to be given to businesses that purchase brand new zero-emission goods vehicles. The intention is to introduce the measure
as soon as possible in the next Parliament.
The new allowances will be available for expenditure incurred in the period of five years beginning on 1 April or 6 April 2010 (for corporation tax and income tax respectively).
A zero-emission goods vehicle will be one that cannot under any circumstances produce CO2 emissions when driven. It must be of a design primarily suited to the conveyance of goods or burden (broadly speaking, a van rather than a car). The normal exclusions for leased assets will apply, as well as the other
general exclusions specified in the legislation for the purposes of the first-year allowance rules.
Various very specific exclusions will also apply to comply with State Aid rules.
Company car charges are to be introduced for zero-emission cars and vans and for ultra-low emission cars.
A reduced appropriate percentage of 5 per cent will be introduced for company cars with an approved emissions figure that does not exceed 75g per kilometre.
A zero rate will apply to all cars that cannot produce any CO2 emissions under any circumstances when being driven. This will replace the narrower statutory reference to electric cars.
There will also be a cash equivalent of zero for a van that cannot produce any CO2 emissions under any circumstances when being driven.
These changes come on top of an earlier announcement of changes to the concept of qualifying low-emission cars.
For prescribed accounting periods starting on or after 1 May 2010, the table of VAT scale charges for taxing private use of road fuel is amended.
From 1 April 2010, the amount of the annual VAT registration threshold rises to £70,000 from £68,000 and the VAT deregistration threshold rises to £68,000 from £66,000.
From the same date, the registration and deregistration limits for relevant acquisitions from other member states rises to £70,000 from £68,000.
For supplies made on or after 1 September 2010, the definition of aircraft that can be supplied at the zero rate changes from one based on weight and usage to one based on the status of the customer. Supplies of aircraft will be zero-rated only where used by airlines operating for reward chiefly on international routes.
There is no change to the treatment of supplies of aircraft to state institutions.
From 1 January 2011, changes are made to the VAT treatment of supplies of natural gas and of heat and cooling. At present, gas supplied via the natural gas distribution system is treated as supplied where either a wholesale customer is established or the natural gas is consumed. UK customers who are VAT registered must account for VAT on the supplies of natural gas they receive from suppliers established abroad as a reverse charge. At present, no rules specifically govern the application of VAT to supplies of heat and cooling.
The rules, which include electricity, are to be amended so as to:
- extend their scope to cover supplies in all categories of natural gas pipeline;
- limit their scope to supplies involving natural gas pipelines located in the member states or linked to such pipelines; and
- extend the relief from VAT at importation to all natural gas imported via a network (including liquefied natural gas by tanker).
The amended rules (above), will be extended to apply to heat and cooling supplied through networks.
For supplies made on and after 31 January 2011, standard-rating applies to certain postal services provided by Royal Mail Holdings plc, the universal service provider (
USP) of public postal services in the UK.
Currently, VAT exemption applies to the conveyance of postal packets, and services connected to the conveyance of postal packets, by the Post Office company, including any wholly-owned subsidiary of the Post Office company. In practice, this means Royal Mail (including Parcelforce).
The exemption will be restricted to supplies of public postal services and incidental goods made by a USP. The exemption will only apply to supplies of services made under a licence duty, including those where – pursuant to a licence duty – the USP allows private postal operators access to its postal facilities.
Standard-rating will apply to supplies of services that a USP is not required to make under a licence duty, e.g. those made by Parcelforce, and services provided on terms and conditions that have been freely negotiated.
Social mail, including stamped mail, remains exempt from VAT, so private individuals should largely be unaffected.
From 1 November 2010, a reverse charge applies to supplies of emissions allowances to try to stop Missing Trader Intra-Community (
MTIC) fraud. At the same time zero-rating, which was introduced from 31 July 2009, no longer applies to such supplies.
There will be no additional reporting requirements in respect of emissions allowances. Thus, suppliers will not be required to submit reverse charge sales lists for these supplies.
From 1 January 2011, for certain specified assets, VAT cannot be recovered in respect of private use or purposes other than those of a business.
The change should ensure that VAT recovery is restricted to the business use of the asset, excluding any private use by the taxpayer or the taxpayer’s staff.
The capital goods scheme will be amended to take account of changes in private use over subsequent years.
Until Vereniging Noordelijke Land-en Tuinbouw Organisatie v Staatssecretaris van Financien (Case C-515/07) (
VNLTO), some taxpayers were incorrectly permitted to use Lennartz accounting (HMRC Brief 2/2010 (22 January 2010)).
Where such taxpayers choose not to unravel these arrangements, they must continue to account for the VAT due under the arrangements. Legislation will ensure that this position is treated as having always had effect.
These changes may affect taxpayers who buy land, property, boats and aircraft which are used for both business and private purposes.
When the law ensures that there is no entitlement to any VAT recovery on the private use of directors’ accommodation, the law relating to recovering VAT on directors’ accommodation will be repealed.
The Finance Bill 2010 will contain provision for the introduction of landline duty with effect from 1 October 2010. The duty will be 50p per line per month, and will be apply when a local loop is made available for use. The duty will be payable by the owner of the loop.
The standard rate of landfill tax will increase from £48 per tonne (the rate in force from 1 April 2010) to £56 per tonne, with effect from 1 April 2011, under provision to be included in the Finance Bill 2010.
In a measure to have effect from 1 April 2010, the maximum credit claimable by landfill site operators for contributions made to bodies enrolled under the landfill communities fund (LFC) will be reduced from 6 per cent to 5.5 per cent.
In a measure intended to be effective from 1 October 2010, there is to be provision for the publication and review of criteria for determining the lower rate of landfill tax, and for the Treasury to have regard to those criteria when listing materials that qualify for the lower rate.
For supplies of taxable commodities that are treated as taking place on or after 1 April 2011, the rates of climate change levy are increased.
The rate of aggregates levy rises from £2.00 per tonne to £2.10 per tonne for any aggregate commercially exploited on or after 1 April 2011.
The Northern Ireland Aggregates Levy Credit Scheme is to be extended for a further 10 years to 1 April 2021.
The Scheme grants an 80 per cent tax credit to aggregate producers in Northern Ireland who meet certain conditions.
The fuel duty rates will change from 1 April 2010, 1 October 2010, and 1 January 2011.
The rates of air passenger duty rise for any carriage of a passenger which begins on or after 1 November 2010, irrespective of when the ticket for travel was booked or purchased.
Rates of duty on tobacco products imported into, or manufactured in, the UK will increase by 1 per cent from 6pm on 24 March 2010.
Duty rates for all still ciders, and some sparkling ciders, will increase by 10 per cent above inflation. Duty rates for all other alcoholic drinks will increase by two per cent above inflation.
These annual duty rate changes will have effect on and after 29 March 2010.
Legislation will be included in the Finance Bill 2010 to provide a power to amend the definition of cider. The legislation will have effect on and after the date that Finance Bill receives Royal Assent.
Legislation will be included in the Finance Bill 2010 to:
- reduce the rate of bingo duty to 20 per cent with effect for accounting periods beginning on or after 29 March 2010;
- increase the amounts of amusement machine licence duty in line with inflation with effect for licence applications received by HMRC after 4pm on 26 March 2010; and
- raise the gross gaming yield bandings for gaming duty in line with inflation with effect for accounting periods starting on or after 1 April 2010.
Legislation is to be introduced to revise the Disclosure of Tax Avoidance Scheme (
DOTAS). Increased penalties will be imposed for failure to comply with the rules. The DOTAS
hallmarks will be revised and extended. National Insurance regulations will be changed to mirror the changes in primary and secondary legislation.
It is expected that the various new measures will come into effect on a common date in the autumn of this year. The provisions will:
- introduce a new trigger point for the disclosure of actively marketed schemes;
- impose further requirements on a person introducing a client to a notifiable scheme;
- increase the penalties for failure to comply with a disclosure obligation; and
- impose further requirements on promoters to provide information to HMRC.
The SDLT and PRT error or mistake rules are to be amended to provide a means of reclaiming overpayments where there is no other statutory route. This will mirror changes made by the Finance Act 2009 to the rules for income tax, capital gains tax and corporation tax.
This measure will take effect from 1 April 2011 and is intended for inclusion in a Finance Bill to be introduced in the next Parliament.
Corporation tax and petroleum revenue tax are to be brought within the harmonised interest regime introduced by the Finance Act 2009. The harmonised interest regime provides a single legislative framework for interest chargeable on late payments and payable on repayments in respect of taxes and duties administered by HMRC,
It should be noted that this will not include the rules applying to quarterly instalment payments, which will remain in force.
This measure will be legislated in a Finance Bill to be introduced as soon as possible in the next Parliament.
A revised penalty regime will apply to taxpayers who fail to file their tax returns on time or pay their tax liabilities in full and on time for:
- VAT and insurance premium tax;
- aggregates levy, climate change levy and landfill tax;
- air passenger duty, alcoholic liquor duties, tobacco products duty, hydrocarbon oil duties, general betting duty, pool betting duty, bingo duty, lottery duty, gaming duty and remote gaming duty; and
The revised penalties will:
- be introduced over a number of years;
- treat late payment of tax and late-filed returns separately;
- reflect the more frequent filing and paying obligations for these taxes and duties compared to direct tax;
- try to encourage filing and payment by the correct dates by imposing an escalating series of penalties, depending on the number of failures within a set penalty period. Further penalties will arise if there is a prolonged delay in filing returns or paying the tax due;
- include a right of appeal if the taxpayer has a reasonable excuse for the lateness; and
- be avoided where taxpayers have agreed a
time to pay arrangement with HMRC (as regards the late payment penalties).
The key features of the revised penalty for late filing of quarterly returns are:
- £100 penalty immediately after the due date for filing (whether or not the tax has been paid);
- the failure also starts a penalty period, which is set for a year;
- if there are further failures within the penalty period, then the fixed penalty escalates by £100 for each of those subsequent failures, up to a maximum of £400 per failure. The penalty period is also extended to the first anniversary of the latest failure;
- if any of the failures are prolonged, then additional penalties of five per cent of the tax on the relevant return are charged at six and 12 months from the date of the failure; and
- if, by failing to make the return, the taxpayer is deliberately withholding information to stop HMRC from correctly assessing the liability to tax, then penalties of up to 100 per cent of the tax on the return may be chargeable.
The revised penalty for late filing of monthly returns is similar to the quarterly model above, except that the fixed penalties are £100 for the first three failures in any penalty period, £200 for the second three failures, etc., up to a maximum of £400 per failure.
The key features of the revised penalty for late quarterly payments are:
- if a taxpayer first pays late, although there is no penalty, it starts a penalty period, which is set for a period of a year;
- any further failures within that period attract a penalty of two per cent of the unpaid tax, as well as extending the penalty period to the first anniversary of the latest failure;
- a third failure within the period attracts a penalty of three per cent, with further failures attracting a maximum of four per cent; and
- if any of the failures are prolonged, then additional penalties of five per cent of the unpaid tax are charged at six- and 12-months from the date of the failure.
The revised penalty for late monthly payments is similar in structure to the quarterly model above, except that, after the first failure, the tax-geared penalties are:
- one per cent for the next three failures in any penalty period; and
- two per cent of the next three failures, etc., up to a maximum of four per cent per failure.
Special provisions deal with circumstances where taxpayers change from a monthly to a quarterly return, or where exceptional payment obligations arise.
Higher penalties are to be introduced for individuals and businesses who fail to provide a full account of their income tax or capital gains tax liabilities,
where the failure is linked to an offshore matter. The changes are expected to apply broadly from 1 April 2011.
There is no intention to change the mechanics of the penalty frameworks but the absolute level of the percentage used to determine tax-geared penalties will depend on the jurisdiction in which the non-compliance arises. If the jurisdiction is one that has a provision for automatic exchange of information with the UK on savings income then the penalty percentages will be the same as for non-compliance arising in the UK. In other cases, the level of penalty will be either one-and-a-half times those set out in the existing Schedules (where there is an agreement to share information, but this is not done automatically) or twice the amounts in the Schedules (where there is no such agreement).
The Government intends to introduce a measure to
update the compliance checking framework for certain excise duties. The intention is to introduce the measures
as soon as possible in the next Parliament.
The aim is to modernise information and inspection powers and to align record-keeping rules and time limits for assessments and claims.
The excise duties affected include those on alcohol, tobacco, energy products, gambling duties and air passenger duties.
HMRC are to gain powers, provisionally effective from 6 April 2011, to require a financial security from employers
where amounts due under PAYE or NICs obligations are seriously at risk. The amount of security will be set by HMRC in the light of the potential liability.
The detail of the new powers will be set out in regulations and will be the subject of a 12-week consultation. Employers will have the right of appeal against both the imposition and the amount of the security. Failure to give security when required to do so will be a criminal offence which may result in a fine of up to £5,000.
Although new for PAYE purposes, the measure mirrors provisions already applying for VAT liabilities (whereby, for example, a director may be required to give personal security for the VAT liabilities of the company).
A measure, to be included in the Finance Bill 2010, will remove the requirement for HMRC to notify addressees and invite them to attend before packets suspected of containing smuggled items can be opened.
This measure will take effect from the day on which the Finance Bill receives Royal Assent.