Overview

The Finance (No. 2) Bill is a UK government bill that introduces several changes to the tax system. It amends income tax, corporation tax, capital gains tax, excise duties, and other taxes, introduces a new diverted profits tax, and includes anti-avoidance measures. It also makes adjustments to various tax allowances and rates.

Description

The bill is extensive, covering numerous tax areas. Key aspects include:

• Income Tax Changes: Adjustments to personal allowances, basic rate limit, higher rate thresholds, and changes to the taxation of company car benefits, van benefits, and expenses reimbursements. A new exemption for board or lodging provided to carers was included. The bill also included provisions relating to disguised investment management fees and increased remittance basis charges.
• Corporation Tax Changes: A reduction in the main rate of corporation tax to 20% for the financial year 2016. Amendments to research and development tax credits, film tax relief, television tax relief and tax avoidance provisions involving carried forward losses were also included.
• Capital Gains Tax Changes: Amendments regarding disposals of UK residential property by non-residents, entrepreneurs' relief, and wasting assets. It contains further provisions regarding relevant high value disposals.
• Excise Duties and Other Taxes: Changes to rates of duty on alcoholic liquor, tobacco products, air passenger duty, and vehicle excise duty. It introduces new regulations for wholesaling of controlled liquor, with penalties and a register of approved wholesalers. The bill also includes modifications to the aggregates levy, climate change levy, landfill tax, stamp duty land tax, annual tax on enveloped dwellings, and inheritance tax.
• Diverted Profits Tax: A new tax is introduced to target companies that avoid UK tax through artificial arrangements or transactions lacking economic substance. This tax includes detailed calculation rules, notification requirements, processes for imposing charges, and appeal procedures.
• Anti-Avoidance Measures: Several measures to tackle tax avoidance, including changes to the disclosure of tax avoidance schemes, accelerated payments, and penalties relating to offshore matters.
• Other Provisions: Amendments related to country-by-country reporting, the status of certain bodies for tax purposes, and the redemption of undated government stocks.

Government Spending

The bill's impact on government spending is complex and depends on the success of its tax raising and anti-avoidance measures. Specific figures for the overall effect on government spending are not readily available from the provided text. The changes to tax rates and allowances will likely affect revenue collection, and the introduction of diverted profits tax aims to increase revenue. However, some tax reliefs and exemptions could reduce revenue.

Groups Affected

• Individuals: Changes to income tax rates, allowances, and benefits in kind will affect all taxpayers. Changes to inheritance tax exemptions will effect those inheriting specific types of awards or those working in emergency services. Those using the remittance basis will be effected by increased charges.
• Companies: The corporation tax rate change, R&D tax credit adjustments, and the new diverted profits tax will significantly impact companies. Banking companies will also be effected by the changes proposed in the bill. The anti-avoidance measures will affect companies engaging in tax avoidance schemes.
• Charities: Specific charities will be affected by changes to VAT refund provisions. The bill proposed changes to VAT refunds to certain charities involved in palliative care, air ambulance, search and rescue, and medical courier services.
• Oil and Gas Companies: Significant changes are introduced to the supplementary charge, investment allowance, and cluster area allowance, affecting profitability in the sector.
• Wholesalers of Alcoholic Liquor: New regulations will impact this sector, introducing licensing requirements and penalties for non-compliance.
• Tobacco Companies: Changes to tobacco duty rates will affect this industry.
• Property Owners and Developers: Changes to capital gains tax on residential property will affect property owners, particularly non-residents. Those involved in the sale and leaseback arrangement of UK residential properties will also be affected.

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