HMRC and HM Treasury published tax policy updates and draft legislation for the Finance Bill 2011 on 9 December 2010. Areas covered include CFCs (interim reform), taxation of foreign branches, bank levy, chargeable gains of corporates and a new approach to tax policy making.
Note: we have added links to more detailed coverage published by PLC after 9 December. See also this practice note this summarising tax consultations and draft legislation published in autumn 2010. (Free access.)
On 9 December 2010, HM Treasury and HMRC published tax policy updates and draft legislation for the Finance Bill 2011. Although most of the measures have been the subject of consultation, this is the first time we have seen draft legislation on, among others, the interim CFC changes, taxation of foreign branches and changes to the taxation of corporate chargeable gains. Other key measures include draft anti-avoidance legislation targeting disguised remuneration, a draft protocol on immediate anti-avoidance measures and revised draft bank levy legislation, including the rates. In this update, we have briefly summarised the announcements. We have also linked to more detailed analysis of some of the key announcements.
Tax policy updates and draft legislation published on 9 December 2010
On 9 December 2010, HM Treasury and HMRC published tax policy updates and draft legislation for the Finance Bill 2011.
The draft legislation published today is open for comment until 9 February 2011. The legislation (revised if appropriate) will be included in the Finance Bill 2011. This will be published on 31 March 2011, shortly after the Budget on 23 March 2011. Alongside the draft legislation published today, HM Treasury also announced that a consultation to reform climate change levy will be published shortly (published on 16 December 2010, see Legal update, Government publishes major consultations on reform of electricity market and carbon floor price). Subject to the outcome of the consultation, the government will publish draft legislation in January 2011 with a view to including it in the Finance Bill 2011 (see HM Treasury: Overview of draft legislation for Finance Bill 2011 (paragraph 1.53)).
The contents of the Finance Bill 2011 will be confirmed at Budget 2011 but the government does not envisage there being a large number of additional measures.
We have summarised below the key publications and linked to the draft legislation, which is accompanied in the same document by a draft explanatory note and a "Tax Information and Impact Note", which explains what the measure does, why it is proposed and what its impacts are. Many of these measures have been consulted on or announced previously. We have also updated the Practice note, Tax consultations and legislation: what to expect for the rest of 2010 to reflect what was published on 9 December 2010. That practice note also indicates whether the draft legislation or other publication is a new development or simply reflects a previous announcement.
Foreign branches opt-in tax exemption. Draft legislation (HM Treasury: Taxation of foreign branches). Next week the government will also publish a short technical note giving additional information not within the scope of the explanatory note accompanying the draft legislation, including detail on the relationship between the draft legislation and the OECD Model Tax Convention, and matters not covered in the draft legislation. For more detail, see Legal update, Foreign branch exemption: draft Finance Bill 2011 clauses.
Tonnage tax and leasing. Draft legislation (HM Treasury: Leasing into tonnage tax). Consequential on the changes to the wider capital allowances regime.
Transfer pricing: application of OECD principles Draft legislation (HM Treasury: OECD transfer pricing guidelines). Following new guidelines approved by the OECD for publication in July 2010, legislation will be introduced to amend the definition of "transfer pricing guidelines".