Overview

The Finance (No. 2) Bill is a UK government bill that introduces changes to various taxes, including income tax, corporation tax, capital gains tax, plastic packaging tax, and other duties. It also includes measures related to business reliefs, employment income, pensions, and HMRC powers.

Description

Income Tax, Corporation Tax, and Capital Gains Tax

The bill sets income tax rates for 2021-22 and freezes personal allowances and the basic rate limit for subsequent years. Corporation tax rates are set for 2022 and 2023. It introduces a small profits rate for companies from April 2023. It increases the rate of diverted profits tax and introduces temporary super-deductions for capital allowances, with adjustments for disposals after April 2023. The bill also extends the annual investment allowance and temporary increases to periods for carrying back trade losses and R&D tax credits for SMEs. Further provisions amend the treatment of workers' services, termination payments, pensions and the construction industry scheme.

Plastic Packaging Tax

A new plastic packaging tax is introduced at £200 per metric tonne for packaging with less than 30% recycled plastic. The bill outlines liability, payment, registration, exemptions, and penalties for non-compliance. It also addresses issues such as export, import, groups of companies, and anti-avoidance measures.

Other Taxes

The bill also covers changes to inheritance tax, stamp duty land tax (including reduced rates for residential properties and increases for non-resident transactions), annual tax on enveloped dwellings, value added tax (VAT), customs duty, fuel duties, tobacco product duty, vehicle taxes, air passenger duty, gaming duty, climate change levy, and landfill tax.

Miscellaneous Provisions

The bill includes measures concerning freeport tax sites (capital allowances, stamp duty relief), penalties for failure to make returns or pay tax, follower notice penalties, late payment interest and repayment interest on VAT, tax avoidance scheme promotion and disclosure, and HMRC's information gathering powers including those relating to the gig economy. The bill also makes amendments to legislation relating to banks and LIBOR.

Government Spending

The bill's impact on government spending is complex and depends on the success of tax revenue increases and the level of expenditure on tax reliefs and support schemes. Specific figures are not provided in the bill itself, but the introduction of the plastic packaging tax, along with changes to other taxes, is intended to generate increased revenue. Conversely, the various tax reliefs introduced in the bill, such as super-deductions and the extension of the annual investment allowance, will reduce the government's tax revenue. The net impact on government spending remains unclear without further analysis.

Groups Affected

The bill affects numerous groups, including:

• Individuals: Changes to income tax, capital gains tax, inheritance tax, and other taxes.
• Businesses: Changes to corporation tax, capital allowances, VAT, fuel duties, and other business-related taxes. The plastic packaging tax specifically affects producers and importers of plastic packaging.
• Pensioners: Changes to pension rules and the standard lifetime allowance.
• Construction industry: Changes to the Construction Industry Scheme.
• Financial institutions: Changes relating to LIBOR and increased HMRC information-gathering powers.
• HMRC: New powers and responsibilities for collecting and managing various taxes.

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