Overview

The Finance (No. 2) Bill makes numerous amendments to UK tax laws, impacting income tax, corporation tax, capital gains tax, value-added tax (VAT), tobacco duty, and landfill tax. It also introduces provisions relating to tax administration and miscellaneous financial matters.

Description

This bill is a comprehensive piece of legislation with wide-ranging effects on the UK tax system. Key aspects include:

• Income Tax: Extends foster care relief to other care arrangements (shared lives care); clarifies tax treatment of payments to special guardians and those with residence orders; modifies capital allowances for qualifying care relief; alters deductions for seafarers’ earnings.
• Corporation Tax and Capital Gains Tax: Modifies venture capital schemes and enterprise management incentives; adjusts tax treatment of company distributions and REIT stock dividends; alters rules on financing costs and income for group companies; simplifies R&D tax relief for SMEs; clarifies film tax credit rules for unused losses; amends rules on insurance business transfer schemes.
• VAT: Changes reverse charge rules for gas, heat, and cooling; clarifies zero-rating of aircraft supplies; updates rules on postal services; introduces changes to input tax and output tax relating to private use of business assets.
• Other Taxes: Adjusts duty on long cigarettes; revises criteria for landfill tax lower rate.
• Tax Administration: Introduces provisions related to interest on corporation tax and petroleum revenue tax; revises penalties for failure to make returns or pay tax; streamlines recovery of overpaid stamp duty and petroleum revenue tax; strengthens compliance checks for excise duties.
• Miscellaneous: Clarifies the tax treatment of pension schemes under the Pensions Act 2008; addresses the taxation of asbestos compensation settlements.

Government Spending

The bill's impact on government spending is complex and difficult to quantify precisely without detailed analysis of the various tax changes. Some provisions may lead to increased tax revenue (e.g., changes to VAT and excise duties), while others could result in reduced revenue (e.g., extensions of tax reliefs). The net effect on government spending will depend on the overall balance of these changes and their effectiveness in practice.

Groups Affected

The bill potentially impacts a wide range of individuals and businesses:

• Individuals: Foster carers, shared lives carers, special guardians, those receiving residence orders, seafarers, those involved in asbestos compensation settlements.
• Businesses: Companies making distributions, REITs, SMEs claiming R&D relief, film companies, insurance companies, companies involved in group financing, those utilizing venture capital schemes, those using business assets for private purposes, postal services providers, tobacco manufacturers, landfill operators.
• Taxpayers in general: All UK taxpayers will be affected by the various tax law changes although some will be more affected than others.

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