The inheritance tax (IHT) nil rate band, which is currently frozen at £325,00 until April 2018, will continue to be frozen at £325,000 until April 2021.

Legislation extending the freeze on the IHT nil rate band to April 2018 was introduced in the Finance Bill 2014 (see Private client tax legislation tracker 2013-14: Lifetime planning: IHT: nil rate band).

This measure will be included in the Finance (No. 2) Bill 2015, due to be published on 15 July 2015. To follow its progress, see Private client tax legislation tracker 2014-15: IHT: nil rate band.

(See HM Treasury: Summer Budget 2015, paragraphs 1.221 and 2.89, and HM Government: Summer Budget 2015: policy costings, page 9.)

The Budget contained the following pensions-related announcements of interest to private client practitioners:

For more detail on these measures and links to the source materials, see Legal update, July 2015 Budget: key pensions announcements.

As promised in its election manifesto and announced in the Queen's Speech, the government will introduce measures providing that the rates of income tax, Class 1 NICs and VAT will not be increased during the current Parliament.

The Finance (No. 2) Bill 2015 will provide that the basic, higher and additional rates of income tax will not increase above 20%, 40% and 45% respectively. This will apply to earnings income in England, Wales and Northern Ireland and UK-wide savings income (within section 6(1) of the Income Tax Act 2007). The bar on increases in the rate of VAT will apply to the standard rate (20%) and reduced rate (5%). The zero rate cannot exceed 0% and, therefore, will be excluded from the proposed legislation. Additionally, the measures will provide that supplies specified in Schedule 7A (reduced rate supplies) and Schedule 8 (zero rate supplies) of the Value Added Tax Act 1994 may not be removed from those schedules.

Measures will also be introduced in a future NICs Bill barring increases in the rates of employer's and employees' Class 1 NICs. These measures will also provide that the upper earnings level cannot exceed the higher rate tax threshold.

It appears that this legislation has a purely political purpose. It is hard to see the legislative purpose of a statutory provision that simply says that the government will not do something that it is not obliged to do. Perhaps the government should be more aware of the principles noted in its own Good Law project (see Cabinet Office: Good law).

(See HMRC: Tax lock: Income Tax, National Insurance contributions and VAT: TIIN and HM Treasury: Summer Budget 2015, paragraphs 1.65, 1.168 and 2.53.)

The income tax personal allowance will increase to £11,000 in 2016-17 and £11,200 in 2017-18. Once the allowance reaches £12,500 (which the Conservatives promised, in their 2015 election manifesto, would occur by the end of the current Parliament), it will rise in line with increases in the national minimum wage to ensure that taxpayers who work 30 hours or less at the national minimum wage are not subject to income tax. Before this time, the Chancellor will be required to consider the level of the national minimum wage when setting the personal allowance and to report on this at each Autumn Statement and Budget.

The basic rate limit will increase to £32,000 in 2016-17 and £32,400 in 2017-18. The higher rate threshold will increase to £43,000 in 2016-17 and £43,600 in 2017-18. The NICs upper earnings limit will increase in line with the higher rate threshold.

These measures will be included in the Finance (No. 2) Bill 2015.

(See HMRC: Income tax: personal allowance and basic rate limit for 2016 to 2017: TIIN, HMRC: Income tax: personal allowance indexation: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.114, 1.131-1.134 and 2.54-2.56 and HM Government: Summer Budget 2015: policy costings, page 8.)

A personal savings allowance (PSA) will be introduced for basic and higher rate taxpayers from 6 April 2016. This measure was announced in the March 2015 Budget and will exempt from income tax:

Additional rate taxpayers will not receive an allowance.

Banks and building societies will stop the automatic deduction of 20% income tax on non-ISA savings on the same date that the measure is introduced. There will be a public consultation on whether changes are required to the deduction arrangements for other savings income.

For more information about income tax rates and allowances, see Practice note, Tax data: income tax: Individuals: rates and allowances.

To follow the progress of this measure, see Private client tax legislation tracker 2014-15: Income tax: personal savings allowance.

This measure will not be included in the Finance (No. 2) Bill 2015 due to be published on 15 July 2015.

(HM Treasury: Summer Budget 2015, paragraphs 1.230 and 2.76.)

The government has announced that it will abolish the dividend tax credit for individuals and replace it with a new tax-free £5,000 dividend allowance, with effect from April 2016. Dividend income in excess of the tax-free allowance will be taxed at the following rates:

Those who receive significant dividend income will pay more than under the current rules, but most investors should pay the same or less. This measure will be in the Finance Bill 2016. The tax reliefs for dividends on shares held in ISAs and pensions will remain in place.

For background on the current rules for the taxation of dividends, see Practice note, Tax rules for individuals, exempt funds and non-residents.

There will be a consultation in autumn 2015 on the taxation of company distributions generally, so it is possible that further changes will be made to the regime in the Finance Act 2016. The reform is intended, at least in part, to discourage businesses from incorporating in order to pay employee shareholders in the form of dividends rather than wages.

(See HM Treasury: Summer Budget 2015, paragraphs 1.185-1.189, 2.57 and 2.122 and HM Government: Summer Budget 2015: policy costings, pages 20 and 191.)

The Chancellor has announced that higher rate tax relief on mortgage interest payments by individual buy-to-let landlords will be gradually withdrawn. Instead of treating the interest as a deduction in the computation of net property income, a landlord will claim basic rate relief as a deduction from his tax liability. The restriction will not apply to the interest relating to properties that qualify as furnished holiday lettings. Legislation will be published in the Finance (No. 2) Bill 2015.

At present, 100% of mortgage interest paid is allowed as a deduction from property income. The change of basis will be introduced over the four-year period commencing April 2017, with the permitted deduction from profits being 75% of the interest charge for 2017-18, 50% for 2018-19, 25% for 2019-20 and 0% thereafter. In each of those years, the percentage of the interest not deducted will be given as a basic rate tax deduction. The deduction permitted will be calculated as 20% of the lower of:

If the tax reduction is limited by reference to the profits of the property business, unrelieved interest may be carried forward.

For more information on the calculation of income from property, see Practice note, Income tax: calculation of income profits: Property income.

(See HMRC: Restricting finance cost relief for individual landlords: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.190-1.191 and 2.59 and HM Government: Summer Budget 2015: policy costings, page 21.)

The rent-a-room relief will increase to £7,500 a year from 6 April 2016. The purpose of this increase is to recognise the rise in rents since 1997 (when the current limit was set).

The relief applies so that individuals are not subject to income tax on rent of up to £7,500 received for letting out a furnished room in their only or main residence (see Practice note, Income tax: exemptions and reliefs: Miscellaneous reliefs).

(See HMRC: Rent a room relief increase: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.193 and 2.60 and HM Government: Summer Budget 2015: policy costings, page 12.)

The wear and tear allowance will be replaced with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings when calculating their income tax liability. The new relief will apply from April 2016. Legislation will be included in the Finance Bill 2016 and the government will publish a technical consultation before the summer.

Currently, the wear and tear allowance permits residential landlords to deduct 10% of their rent from their profit for income tax purposes, regardless of whether they have incurred any expenditure on improving the property.

(See HM Treasury: Summer Budget 2015, paragraphs 1.192 and 2.58 and HM Government: Summer Budget 2015: policy costings, page 22.)

The government confirmed that it will extend the averaging period for self-employed farmers and market gardeners from two years to five years with effect from April 2016. It also published a consultation document to seek views on how the extension should be designed and implemented. Legislation implementing the changes is likely to be included in the Finance Bill 2016.

The consultation document proposes two options to implement this measure:

The government asks for views on whether these two options would achieve the desired result and what the advantages and disadvantages of each are. The closing date for comments is 7 September 2015.

This measure was first announced in the March 2015 Budget (see Legal update, March 2015 Budget: key business tax announcements: Farmers: averaging period to be extended to five years). For information on averaging profits, see Practice note, Income tax: calculation of income profits: Special rules for certain trades.

(See HMRC: Income tax: Extension of averaging period for farmers and HM Treasury: Summer Budget 2015, paragraph 2.67.)

As announced in the 2014 Autumn Statement and confirmed in the March 2015 Budget, legislation will be introduced to provide a new relief allowing individuals lending through peer-to-peer (P2P) platforms to offset any losses from loans that go bad against other P2P interest received. Draft legislation will be published later in 2015 and the measure will be included in the Finance Bill 2016.

The government will also consult during the summer of 2015 on proposals announced in the 2014 Autumn Statement to introduce a withholding regime for income tax applicable to all peer-to-peer (P2P) lending platforms. Legislation will be introduced in the Finance Bill 2016 and the measure will take effect from April 2017.

For background to the proposals, see Private client tax legislation tracker 2014-15: Income tax: peer-to-peer lending.

(See HM Treasury: Summer Budget 2015, paragraphs 2.74 and 2.75.)

A consultation will take place on reforming the tax treatment of payments from sporting testimonials. This will end before the 2015 Autumn Statement.

The March 2015 Budget indicated that a consultation would take place (see Private client tax legislation tracker 2014-15: Income tax: sporting testimonials). The timing of the consultation is in line with previous confirmation that no changes will be made to the current guidance before April 2016.

(See HMRC: Tax Treatment of Income from Sporting Testimonials – Proposals for Legislation and HM Treasury: Summer Budget 2015, paragraph 2.68.)

As part of the July 2015 Budget, the government published a response document to its summer 2014 venture capital schemes consultation (as to which, see Legal update, Venture capital schemes consultation). The response document and accompanying tax information and impact note confirm that following changes to the Enterprise Investment Scheme (EIS) and Venture capital trust (VCT) qualifying conditions will be introduced in the Finance (No. 2) Bill 2015:

These changes will take effect from the date the Finance (No. 2) Bill 2015 receives Royal Assent (subject to state aid approval).

In addition, the July 2015 Budget confirms that:

These measures were announced in the March 2015 Budget (see Legal update, March 2015 Budget: key business tax announcements: Venture capital schemes changes) and draft legislation to implement them was published for consultation in March 2015 (see Legal update, Venture capital schemes: draft legislation to implement March 2015 Budget announcements published for consultation). Some changes have been made (presumably to keep the schemes within applicable state aid limits). In particular, the original proposed age limit was 12 years for all companies and the total investment limit for companies that are not knowledge-intenstive was £15 million.

The July 2015 Budget, response document and TIIN also confirm the following:

(See HMRC: Income Tax: amendments to tax-advantaged venture capital schemes: TIIN, HM Treasury and HMRC: Tax-advantaged venture capital schemes: draft legislation and explanatory notes and HM Treasury: Summer Budget 2015, paragraphs 1.243 and 2.71-2.73.)

Changes to the ISA rules by regulations will, from 6 April 2016, allow individuals to withdraw and replace funds in their cash ISA in-year without eroding their annual ISA subscription limit. This will also apply to cash held in a stocks and shares ISA. This measure was originally announced in the March 2015 Budget (see Private client tax legislation tracker 2014-15: ISAs: additional flexibility).

The government has published a response to its October 2014 consultation on including peer-to-peer loans within ISAs. It intends to publish draft legislation to introduce a new Innovative Finance ISA for this purpose from 6 April 2016. The government has now published a further consultation seeking views on whether to extend the list of ISA qualifying investments to debt securities and equity offered via crowdfunding platforms. These proposals support the government's dual aims of increasing the range of investments that can be held in an ISA and improving competition in the banking sector.

The government has announced that Help-to-Buy ISAs, which were first announced in the March 2015 Budget, will be available for first time buyers from 1 December 2015. First-time buyers will be able to deposit £200 per month into their Help-to-Buy ISA at participating banks and building societies.

For general information on ISAs, see Practice note, Tax data: individual savings accounts.

(See HM Treasury: ISA qualifying investments: response to the consultation on including peer-to-peer loans, ISA qualifying investments: consultation on whether to include investment based crowdfunding and HM Treasury: Summer Budget 2015, paragraphs 1.231, 2.77 and 2.78.)

The government has launched a consultation on legislation to determine when performance fees arising to fund managers from their fund management activities may be treated as capital in nature and benefit from capital gains taxation. Comments are invited by 30 September 2015. The government will publish a response document with draft legislation and guidance at the 2015 Autumn Statement. The legislation will take effect from 6 April 2016.

According to the government:

The proposed rules will:

The government's options for achieving this are:

The government is aware that performance-linked rewards paid to fund managers who are employees will generally come within the employment-related securities rules (Part 7, Income Tax (Earnings and Pensions) Act 2003) (see Practice note, Employment-related securities). The government currently considers that these rules will provide the correct result in many cases and that the proposed statutory test need not apply in those situations.

Along with the end of base cost shifting for carried interest (see Carried interest: immediate end to the "base cost shift"), this proposal represents a crackdown on perceived abuse in the private equity and asset management industry.

(See HMRC: Taxation of performance linked rewards paid to asset managers: consultation document and HM Treasury: Summer Budget 2015, paragraphs 1.178 and 2.179.)

For carried interest arising on or after 8 July 2015, carried interest holders cease to be entitled to the "base cost shift" unless that carried interest arises in connection with the disposal of an asset or assets of a partnership or partnerships before that date.

Base cost shifting allows carried interest holders to deduct some of the original amount that the investors in those funds paid for the fund's investments, which reduces the carried interest holder's chargeable gain. This is a valuable cost-free and tax-free benefit to carried interest holders. For a detailed explanation and worked example of base cost shifting, see Practice note, Carried interest: tax: "Base cost shift".

Finance (No. 2) Bill 2015 will insert a new regime into the Taxation of Chargeable Gains Act 1992 that provides, among other things, that:

The measure is not intended to affect the taxation of performance-linked rewards that are charged to income tax (as to which, see Tax treatment of fund managers' performance-related returns).

We can gather two things from this development:

(See HMRC: Investment managers: capital gains tax treatment of carried interest: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.177 and 2.179 and HM Government: Summer Budget 2015: policy costings, pages 31 and 190.)

For deaths on or after 6 April 2017, the government will introduce an additional IHT nil rate band (ANRB) when a residence is passed on death to direct descendants. The government has forecast that 63,000 estates would have an IHT liability by 2020‑21 largely due to the rise in house values. This measure is designed to reduce that figure to 37,000 estates, which is around the same level as in 2014-15.

The ANRB will be in addition to the existing £325,000 nil rate band and any unused ANRB can be transferred to a surviving spouse or civil partner where the second death is on or after 6 April 2017. Where the deceased had an interest in more than one residential property, his personal representatives will be able to nominate which residence (so long as it was occupied by the deceased at some point) should benefit from the ANRB. The ANRB for 2017-18 will be £100,000, rising in stages to £175,000 in 2020-21 and in line with the Consumer Prices Index (CPI) after that.

There will be a tapered withdrawal of the ANRB for estates worth £2 million or more.

The government plans to extend the ANRB to estates where the deceased downsized to a less valuable property or ceased to own property on or after 8 July 2015 and assets of equivalent value are passed to direct descendants on death. Additional measures to provide for this will be included in Finance Bill 2016 following a consultation to be published in September 2015.

This measure was widely publicised before the July 2015 Budget and has been cast as the Conservative government's fulfilment of a much earlier pledge to increase the nil rate band to £1 million. The inclusion of estates where the deceased has downsized appears to have been introduced after fears that the original proposal would force elderly couples to hang on to large properties to benefit from the ANRB. The ability to nominate a residence so long as it was occupied by the deceased at some point is generous but should ensure the ANRB is easy to administer.

The principal measure will be included in the Finance (No. 2) Bill 2015 due to be published on 15 July 2015. The extension to estates where the deceased had downsized will be included in the Finance Bill 2016.

To follow the progress of this measure, see Private client tax legislation tracker 2014-15: IHT: main residence allowance.

(See HMRC: Inheritance tax: main residence nil-rate band and the existing nil-rate band: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.114, 1.219-1.221 and 2.88 and HM Government: Summer Budget 2015: policy costings, pages 9 and 191.)

As previously announced, legislation will be introduced to:

These measures will be included in the Finance (No. 2) Bill 2015 to be published on 15 July 2015.

To follow the progress of this measure, see Private client tax legislation tracker 2014-15: IHT: relevant property trust charges and Practice note, Inheritance tax: relevant property trusts: changes to rules.

(See HMRC: Inheritance tax: simplifying charges on trusts and new rules to target avoidance through the use of multiple trusts: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.93.)

For appointments out of will trusts, amending legislation will be introduced to prevent an IHT charge arising in the first three months after a trust commences or within three months after a ten-year anniversary. The amendment will apply to all deaths on or after 10 December 2014.

Currently, appointments made from will trusts within two years of the testator's death have effect as if the testator had originally provided that this should happen in his will (section 144, Inheritance Tax Act 1984 (IHTA 1984)). However, the reading back effect only operates where there would otherwise be a charge to IHT on the appointment. Because of the way IHT charges currently apply to relevant property trusts, no charge can arise in the first three months after the trust commences or in the three months after a ten-year anniversary charge. Will trustees may be caught out by this effect when making appointments soon after the testator has died so that an unexpected tax charge arises. This trap was highlighted by Frankland v IRC (1997) STC 1450 and has become known as the Frankland trap. The Society of Trust and Estate Practitioners (STEP) pressed for this trap to be removed in its response to the government's consultation on the simplification of IHT charges in trusts in June 2014. The measure was included in the draft Finance Bill 2015 legislation, published on 10 December 2014 (see Draft Finance Bill 2015 legislation: key private client measures: IHT: Frankland trap removed for appointments out of will trusts).

To follow the progress of this measure, see Private client tax legislation tracker 2014-15: IHT: Frankland trap removed.

This measure will be included in the Finance (No. 2) Bill 2015 due to be published on 15 July 2015.

(See HMRC: Inheritance tax: simplifying charges on trusts and new rules to target avoidance through the use of multiple trusts: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.93.)

As previously announced, the government will introduce legislation to amend the postponing effect of section 80 of the Inheritance Tax Act 1984 so that, where one spouse succeeds to a life interest, to which their spouse was previously entitled, during their spouse's lifetime, in a trust created by either spouse before 22 March 2006, section 80 will apply from that point (because neither spouse would then have a qualifying interest in possession) so that the trust will be subject to relevant property charges. The amendment will apply after the date that the Finance (No. 2) Bill 2015 receives Royal Assent.

The measure was included in the draft Finance Bill 2015 legislation, published on 10 December 2014. The TIIN published with the Budget does not say whether there will be any changes to the draft legislation.

This measure will be included in the Finance (No. 2) Bill 2015, due to be published on 15 July 2015. For further background and to follow its progress, see Private client tax legislation tracker 2014-15: IHT: successive life interests for spouses and Practice note, Inheritance tax: relevant property trusts: changes to rules: Treatment of successive IIPs for spouses in trusts created before 22 March 2006.

(See HMRC: Inheritance tax: simplifying charges on trusts and new rules to target avoidance through the use of multiple trusts: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.93.)

Legislation is to be introduced removing the requirement that a claim for conditional exemption must be made and relevant property be designated as eligible for the exemption, before a ten-year anniversary charge. The new measure allows trustees to make a claim for conditional exemption within two years after a ten-year anniversary charge and will apply to charges arising under section 79 of the Inheritance Tax Act 1984 on or after the date that Finance (No. 2) Bill 2015 receives Royal Assent.

The measure was included in the draft Finance Bill 2015 legislation, published on 10 December 2014. For further information on the current rule and the proposed amendment to it, see Legal update, Draft Finance Bill 2015 legislation: key private client measures: IHT: heritage property: exemption from ten-year anniversary charge.

This measure will be included in the Finance (No. 2) Bill 2015, due to be published on 15 July 2015.

To follow the progress of the measure, see Private client tax legislation tracker 2014-15: IHT: heritage property and ten-year anniversary charge.

(See HMRC: Inheritance tax: simplifying charges on trusts and new rules to target avoidance through the use of multiple trusts: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.93.)

The government has announced that it will change the deemed domicile rules so that individuals who are UK resident cannot benefit from non-UK domiciled status indefinitely for tax purposes. The law on actual domicile will not change.

Currently, non-UK domiciled individuals pay IHT only on their UK assets and can claim the remittance basis for income tax and CGT. For IHT purposes, an individual is deemed to be UK domiciled if they have been UK resident for at least 17 out of the last 20 tax years or if they have been UK domiciled within the last three calendar years (section 267(1), Inheritance Tax Act 1984). There is no deemed domicile status for income tax and CGT.

The key changes announced in the Budget are that:

A technical briefing published with the Budget includes the following details:

The government will consult on the following points:

For a related measure to charge IHT on UK residential property held by non-domiciled individuals through trusts and companies, see IHT on UK residential property owned indirectly by non-domiciled individuals. For the impact of this measure on the remittance basis, see Remittance basis charge.

We will add this measure to Private client tax legislation tracker 2014-15: International individuals, where you will be able to follow its future progress. For information about the current rules, see Practice notes, Domicile, Residence, ordinary residence and domicile: UK tax implications and Remittance basis: what individuals need to know: overview.

This measure will be included in the Finance Bill 2016 and take effect from 6 April 2017. The government will publish a detailed consultation document after the 2015 summer recess and there will be a further consultation on the draft Finance Bill 2016 legislation.

(See HMRC: Technical Briefing on Non Dom changes announced at Summer Budget 2015, HM Treasury: Summer Budget 2015, paragraphs 1.194, 1.195, 2.63, 2.64 and 2.91, and HM Government: Summer Budget 2015: policy costings, pages 26 and 190.)

The government has announced that it will amend the IHT excluded property rules so that UK residential property owned indirectly by non-UK domiciled individuals will be subject to IHT.

Non-UK domiciled individuals pay IHT only on their UK assets. Currently, therefore, a non-UK domiciled individual can avoid IHT on UK residential property by owning it indirectly, for example, by "enveloping" it in an offshore company, an excluded property trust with an offshore company beneath it or a partnership.

A technical briefing published with the Budget includes the following details about the measure:

For related changes to the IHT deemed domicile rules, see Permanent non-domiciled tax status abolished.

We will add this measure to Private client tax legislation tracker 2014-15: International individuals, where you will be able to follow its future progress. For information about the current excluded property rules, see Practice note, Inheritance tax: overview: Excluded property.

This measure will be included in the Finance Bill 2017 and will take effect from 6 April 2017. The government will publish a consultation document after the 2015 summer recess and there will be a further consultation on the draft Finance Bill 2017 legislation.

(See HMRC: Technical Briefing on Non Dom/IHT Residential property changes announced at Summer Budget 2015, HM Treasury: Summer Budget 2015, paragraphs 1.196 and 2.90 and HM Government: Summer Budget 2015: policy costings, pages 27 and 190.)

The £90,000 remittance basis charge for individuals who have been resident in the UK in 17 out of the last 20 tax years will become redundant from 6 April 2017. This is as a result of the measure, also announced in the July 2015 Budget, to treat all remittance basis taxpayers as deemed UK domiciled for all tax purposes after 15 years of UK residence (see Permanent non-domiciled tax status abolished).

The £30,000 remittance basis charge (for individuals who have been resident in the UK in at least seven out of the last nine tax years) and the £60,000 remittance basis charge (for individuals who have been resident in the UK in at least 12 out of the last 14 tax years) will remain unchanged.

The government will consult, later in 2015, on the need to retain the automatic application of the remittance basis for individuals with annual unremitted income and gains of less than £2,000 after they have been resident in the UK for 15 years.

For more information on the remittance basis charge, see Practice note, Remittance basis: remittance basis charge.

This measure will be included in the Finance Bill 2016.

(See HMRC: Technical Briefing on foreign domiciled persons changes announced at Summer Budget 2015, HM Treasury: Summer Budget 2015, paragraph 2.63 and HM Government: Summer Budget 2015: policy costings, page 26.)

The government will not introduce a minimum claim period for the remittance basis charge. The government published a consultation on 22 January 2015 on making an election to use the remittance basis apply for a minimum of three years, in order to prevent taxpayers from arranging their affairs so as to only pay the remittance basis charge occasionally (see Private client tax legislation tracker 2014-15: Remittance basis: minimum claim period). The proposal will not now go ahead following consideration of the consultation responses and the announcement of wider reforms to the taxation of non-UK domiciled individuals announced in the July 2015 Budget (see Permanent non-domiciled tax status abolished).

(See HMRC: Technical Briefing on foreign domiciled persons changes announced at Summer Budget 2015 and HM Treasury: Summer Budget 2015, paragraph 2.65.)

Income earned by non-UK resident participants in the 2015 London Olympic and Paralympic Anniversary Games taking place between 24 and 26 July 2015 will be exempt from income tax.

Without this exemption, section 27 of Income Tax (Earnings and Pensions) Act 2003 and sections 13 and 14 of Income Tax (Trading and Other Income) Act 2005 would impose a UK income tax charge on the income gained as a result of performance at the 2015 Anniversary Games. More significantly, an income tax charge would also arise on a proportionate share of worldwide sponsorship income.

The exemption celebrates and maintains the legacy of the London 2012 Olympic and Paralympic Games, and marks its third anniversary. It follows a similar exemption that was extended to foreign athletes participating in the London 2012 Olympics (see Article, London 2012: Tax free talent?). The exemption will not apply to the income of UK resident sportspeople.

This measure will be included in the Finance (No. 2) Bill 2015 due to be published on 15 July 2015.

(See HMRC: 2015 London Anniversary Games: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.69.)

The government has published responses received to its December 2014 discussion paper on business rates avoidance and is currently considering these responses so that options for addressing avoidance can be brought forward. The responses identified avoidance of empty property rates through artificial or contrived occupation by charities and arrangements where charities owned a property, and it appeared that, when next in use, it would be mostly for charitable purposes. Responses also suggested that premises that were overly large or located inconveniently for the charity’s purposes were often taken on and charities were often unable to substantiate their claims of future use, on which the eligibility of a future relief would depend, and occupation was minimal or infrequent. Respondents also suggested that the Charity Commission should use their powers more effectively or be given more powers.

This development will not be included in the Finance (No. 2) Bill 2015, due to be published on 15 July 2015.

(See Department for Communities and Local Government and HM Treasury: Business rates avoidance: summary of responses.)

The NIC employment allowance, which was introduced with effect from 6 April 2014, is to rise to £3,000 from its current level of £2,000 with effect from April 2016. The purpose of the increase is to offset the impact on small employers of increases in the National Minimum Wage (NMW) and the move towards a new National Living Wage (NLW). To quote the example given by the Chancellor in his Budget speech, this will mean that a small business that employs four full time workers and pays them £9 per hour each (the proposed new NLW) will face no employers' NIC liability. However, companies where the only employee is the director will no longer be entitled to claim the allowance.

(See HM Treasury: Summer Budget 2015, paragraphs 1.127, 1.198, 1.241, 2.61 and 2.62 and HM Government: Summer Budget 2015: policy costings, pages 18 and 30.)

The Chancellor announced in the July 2015 Budget that the legislation would be amended to prevent universities and research institutes from claiming a payable tax credit in relation to pure research. This change will apply to expenditure incurred on or after 1 August 2015.

The intention of the legislation, as amended in 2013, was to make it possible for large companies, even those with no liability to corporation tax, to claim the credit. It was never intended that universities and research institutes should benefit from it on their own research or research subcontracted to them. The amendment corrects an anomaly in the legislation. It will not affect the ability of spin-out companies to claim in respect of research and development carried out with a view to commercial development. For background, see Practice note, R&D tax reliefs: practical aspects.

(See HMRC: Corporation tax: R&D tax credits: universities and charities: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.121.)

The government intends to increase support for social impact bonds (SIBs) at the next Spending Review and will consult with experts to identify suitable future options.

The government wants to promote SIBs generally as a way of funding public sector services and projects and is keen to position the UK as the world leader in SIB innovation. The government is investing in the infrastructure required to grow the SIB market in the UK as well as using home-grown expertise to advise other countries on similar ways of funding public sector projects.

For more information on SIBs, see Practice note, Social impact bonds.

This measure will not be included in the Finance (No. 2) Bill 2015 due to be published on 15 July 2015.

(See HM Treasury: Summer Budget 2015, paragraph 2.27.)

The government has earmarked £70 million of banking fines over the next five years to support charities and good causes with a particular emphasis on military charities and support for ex-servicemen and women.

It is not clear whether this sum is instead of, or in addition to, the £75 million of banking fines promised in the March 2015 Budget (see March 2015 Budget: key private client tax announcements: Financial support for charities).

For background information on the fines levied in relation to LIBOR, see Practice note, Hot topics: Benchmark regulation and enforcement in the UK.

This measure will not be included in the Finance (No. 2) Bill 2015 due to be published on 15 July 2015.

(See HM Treasury: Summer Budget 2015, paragraph 2.47.)

The July 2015 Budget confirms that the government is to consult in summer 2015 on the technical detail of introducing tougher measures to punish (and therefore deter) taxpayers who persistently enter into tax avoidance schemes that fail. The tougher measures include increased financial penalties, increased reporting obligations, "naming and shaming" and restricting access to tax reliefs. The government has previously consulted on proposals, see Legal update, Consultation on sanctions for serial tax avoiders and GAAR-specific penalties and Private client tax legislation tracker 2014-15: Deterring serial avoiders.

It is also announced that the Promoters of Tax Avoidance Schemes (POTAS) regime (as to which, see Practice note, Tax avoidance schemes: high risk promoters: conduct and monitoring notices) is to be widened to bring within that scheme promoters whose schemes are regularly defeated.

Legislation to implement these measures will be introduced in the Finance Bill 2016.

(See HM Treasury: Summer Budget 2015, paragraphs 1.183 and 2.174.)

The July 2015 Budget confirms that the government is to consult in summer 2015 on the detail of introducing a penalty for the GAAR (as to which, see Practice note, General anti-abuse rule (GAAR)). The government previously consulted on the proposal for a penalty for the GAAR, including whether it would be an effective deterrent, whether penalties should be tax-geared or fixed and subject to mitigation, and the appropriate trigger point for levying penalties (see Legal update, Consultation on sanctions for serial tax avoiders and GAAR-specific penalties). The government also announced that it is considering new measures to strengthen the GAAR.

Legislation to implement these measures will be introduced in the Finance Bill 2016. To track their progress to implementation, see Private client tax legislation tracker 2014-15: GAAR-related penalties.

(See HM Treasury: Summer Budget 2015, paragraphs 1.183 and 2.175.)

As announced as part of the March 2015 Budget, the government will legislate to require financial intermediaries and tax advisers to notify their UK resident customers with UK or overseas accounts of the full impact of the Common Reporting Standard (CRS), the opportunities to disclose and the penalties they could face for non-disclosure (see Tax legislation tracker: compliance, disputes and investigations: Intermediaries' duty to provide information about Common Reporting Standard). (For information on the CRS and its implementation in the UK, see Tax legislation tracker: compliance, disputes and investigations: Implementing automatic exchange of information agreements.)

The Finance (No. 2) Bill 2015 will include a power, with effect from Royal Assent, to make regulations achieving this.

The regulations are to stipulate that financial intermediaries, tax advisers and other professionals that may be aware of, or may have given advice about, an offshore account must notify their customers that:

The regulations are to be made after Royal Assent to the Finance (No. 2) Bill 2015, following informal consultation with financial institutions and tax advisers to develop targeted and cost-effective communications, and to ensure the right people are involved in delivering the messages. The regulations are expected to have effect from early 2016.

(See HMRC: Tackling offshore evasion: requiring financial intermediaries and tax advisers to notify their customers: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.168.)

The Chancellor announced that the government would invest £800 million in HMRC over this Parliament to enable HMRC to tackle non-compliance and tax evasion. (In his speech, the amount was £750 million.) The government aims to triple the number of criminal investigations that HMRC undertakes into serious and complex tax crime. A significant focus of HMRC's efforts will be wealthy individuals, trusts, pension schemes and non-domiciled individuals, although non-compliance by small and mid-sized businesses and public bodies will also be targeted.

The government will consult on enhancing the information reported to HMRC by wealthy individuals and trustees and also on extending HMRC's Customer Relationship Manager model to individuals with net wealth between £10 million and £20 million.

It was also announced that HMRC would consult on legislation to be introduced in the Finance Bill 2016 to empower HMRC to acquire information from online intermediaries and electronic payment providers. (For HMRC's current information-gathering powers, see Practice note, HMRC information powers.)

The measures will be effective from April 2016. New HMRC officers and investigators and Crown Prosecution Staff will be engaged to resource these activities.

The government will also create a digital disclosure channel to enable taxpayers easily to disclose their unpaid tax liabilities.

(See HM Treasury: Summer Budget 2015, paragraphs 1.171, 1.173, 1.182, 2.171-2.173, 2.180 and 2.181 and HM Government: Summer Budget 2015, Policy costings, pages 36-38, 42-43 and 191.)

The government has announced that legislation to allow HMRC to directly recover tax debts from the bank and building society accounts of tax debtors (direct recovery of debts) will be included in the Finance Bill (No. 2) 2015.

The direct recovery of debts legislation was first announced in May 2014 and, following a consultation, draft legislation was published on 10 December 2014 for inclusion in the Finance Act 2015 (see Legal update, Direct recovery of debts: draft legislation). However, it was announced in the March 2015 Budget that the legislation would not be included in the Finance Act 2015 but would, depending on the outcome of the general election, be considered for inclusion in a future Finance Bill (see Legal update, March 2015 Budget: key business tax announcements: Direct recovery of debts).

(See HMRC: Direct recovery of debts due to HMRC from debtors' bank and building society accounts: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.170.)

The Finance (No. 2) Bill 2015 will contain legislation simplifying the rules relating to the payment of interest on tax-related debts following court action with immediate effect. The interest rate will be:

These rates will apply to new and pre-existing judgments and orders for interest accruing on or after 8 July 2015. The measure ensures that all interest rates for tax-related debts (whether arising from court action or not) are contained in the tax legislation.

Currently, section 17(1) of the Judgments Act 1838 and section 74(1) of the County Courts Act 1984 apply interest of 8% on debts that follow court action. Draft legislation for inclusion in the Finance (No. 2) Bill 2015 disapplies these sections and separately sets out the above rates.

(See HMRC: Simplification of HMRC debtor and creditor interest rate: TIIN (including draft legislation) and HM Treasury: Summer Budget 2015, paragraph 2.167.)

Amending legislation relating to late payment interest provisions for inheritance tax (IHT) will:

The measure was announced in the 2014 Autumn Statement and included in the draft Finance Bill 2015 legislation, published on 10 December 2014 (see Legal update, Draft Finance Bill 2015 legislation: key private client measures: IHT: interest changes to support HMRC's new digital service). It will complement other legislative changes to support HMRC's digitisation of IHT and ensure that the relevant interest provisions will apply correctly when the new online service becomes available from 2015-16. The amendments will come into force at an appointed day to be specified in regulations. This is expected to coincide with the new online service becoming available.

This measure will be included in the Finance (No. 2) Bill 2015, due to be published on 15 July 2015. To follow its progress, see Private client tax legislation tracker 2014-15: HMRC and tax policy: IHT: interest and other changes to support online service.

(See HMRC: Inheritance Tax: changes to interest to support the new digital service: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.92.)

The government confirmed that it will publish a roadmap by the end of 2015 setting out proposals to reform tax administration for individuals and small businesses. The aim is to replace annual tax returns with digital tax accounts. HMRC will discuss the policies underpinning the measure with key stakeholders and delivery partners (including small businesses and customer representatives) over the summer.

This measure was first announced in the March 2015 Budget (see Tax legislation tracker: compliance, disputes and investigations: Digital tax accounts).

(See HM Treasury: Summer Budget 2015, paragraphs 1.247 and 2.166.)

As part of the 2014 Autumn Statement, the government announced that it would consult on a new power to enable HMRC to close one or more aspects of a tax enquiry while leaving other aspects open. HMRC launched the consultation on 18 December 2014 and provided an update as part of the March 2015 Budget. (See Private client tax legislation tracker 2014-15: Tax enquiries: partial closure.)

As part of the July 2015 Budget, the government announced that HMRC would respond to the consultation during summer 2015.

(See HM Treasury: Summer Budget 2015, paragraph 2.169.)

The government will ask the Office of Tax Simplification (OTS) to review the closer alignment of income tax and national insurance contributions (NICs).

The government first announced its intention to explore this in the 2011 Budget. In the 2012 Autumn Statement, the government said it would wait for further progress on planned operational change to the tax system (by which we assumed he was referring to the introduction of real-time information accounting for PAYE) before consulting formally on the integration of income tax and NICs. This was in accordance with the provisional timetable set out in its November 2011 consultation, which foresaw consultation on draft legislation in 2013-15 and implementation of a reformed system in 2017. To track developments on the integration of income tax and NICs, see Tax legislation tracker: employment: Merger of income tax and NICs.

For an overview of income tax and NICs in the context of employment, see Practice note, Taxation of employees. For an overview of PAYE real-time information, see Practice note, Pay as you earn (PAYE): Real-time information.

(See HM Treasury: Summer Budget 2015, paragraphs 1.245 and 2.158.)

The government will introduce legislation in the Finance Bill 2016 to establish the OTS as a permanent office of HM Treasury, and expand its role and capacity.

The OTS was originally established in 2010 for the duration of the current Parliament, to provide independent advice to the government on reducing complexity in the tax system (see Legal update, Office of Tax Simplification established) and has delivered reports on numerous aspects of the tax system, including the taxation of partnerships, small businesses and tax-advantaged employee share schemes.

(See HM Treasury: Summer Budget 2015, paragraphs 1.245 and 2.157.)