Overview

The Finance (No. 2) Bill is a UK government bill that makes various changes to tax laws, including income tax, corporation tax, capital gains tax, and other taxes such as plastic packaging tax, stamp duty land tax, and VAT. The bill also includes measures related to free ports, penalties, and HMRC powers.

Description

The bill is divided into four parts. Part 1 deals with income tax, corporation tax, and capital gains tax, covering areas such as tax rates, reliefs for businesses (including temporary extensions of loss carry-back and R&D tax credits), employment income, pensions, and the construction industry scheme. It also includes measures addressing hybrid mismatches and diverted profits tax. Significant changes include the introduction of “super-deductions” for capital investment and adjustments to the standard lifetime allowance for pensions.

Part 2 introduces a new plastic packaging tax, aiming to encourage the use of recycled plastic. It details the tax's charge, liability, rate, payment methods, exemptions, and penalties for non-compliance. The tax is levied on plastic packaging components with less than 30% recycled plastic content. The bill also outlines registration requirements for producers and importers.

Part 3 covers amendments to other taxes, such as inheritance tax (freezing rate bands), stamp duty land tax (temporary reduced rates, increased rates for non-residents), annual tax on enveloped dwellings, value added tax (extension of reduced rates for hospitality and tourism), customs duty, fuel duties, tobacco product duty, vehicle excise duty, air passenger duty, and environmental taxes. Specific measures include the extension of VAT reductions in the hospitality sector.

Part 4 encompasses miscellaneous and final provisions, including those related to freeport tax sites (capital allowances and stamp duty land tax relief), penalties for various tax offenses (including follower notices), late payment interest and repayment interest for VAT, tax avoidance schemes, and increased powers for HMRC. This includes provisions to combat tax avoidance and enhance HMRC’s information-gathering capabilities.

Government Spending

The bill's impact on government spending is complex and multifaceted. While the introduction of new taxes like the plastic packaging tax is expected to generate revenue, other measures, such as tax reliefs and support schemes, will reduce government income. Specific figures for the overall net effect are not provided in the bill text.

Groups Affected

• Individuals: Changes to income tax rates and allowances, pensions, and capital gains tax will affect individuals' tax liabilities.
• Businesses: Corporation tax rate changes, capital allowances (especially super-deductions), R&D tax credits, and the construction industry scheme will impact businesses. The plastic packaging tax directly affects producers and importers of plastic packaging.
• Pensioners: The freezing of the standard lifetime allowance will affect pension scheme members and their benefits.
• Construction Industry: Changes to the construction industry scheme will affect contractors and sub-contractors.
• Hospitality and Tourism Sectors: The extension of reduced VAT rates will benefit businesses in these sectors.
• Financial Institutions: Increased HMRC powers to obtain information from financial institutions will impact their operations.
• Taxpayers involved in tax avoidance: Increased penalties and enhanced HMRC powers aimed at addressing tax avoidance will directly impact these groups.

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