The 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 Tax legislation tracker: compliance, disputes and investigations: Deterring serial avoiders.

The Promoters of Tax Avoidance Schemes regime (as to which, see Practice note, Tax avoidance schemes: high risk promoters: conduct and monitoring notices) will also 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 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 is also 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 Tax legislation tracker: miscellaneous: GAAR-related penalties.

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

The government will invest £800 million in HMRC over this Parliament to enable HMRC to tackle non-compliance and tax evasion. (In the Chancellor's 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, 37, 38, 42, 43 and 191.)

The main rate of corporation tax for non-ring fenced profits will reduce to 19% for the financial year commencing 1 April 2017 and to 18% for the financial year commencing 1 April 2020. Both changes will be implemented by the Finance (No. 2) Bill 2015.

From 1 April 2015, the main rate of corporation tax applies to all UK tax resident companies regardless of their annual profits. However, separate corporation tax rates apply to ring-fenced profits from oil and gas extraction and rights. For further information, see Practice notes, Corporation tax: general principles and Tax rates and limits: Corporation tax: Rates.

(See HMRC: Corporation tax: main rate: TIIN and HM Treasury: Summer Budget 2015, paragraphs 1.239 and 2.117.)

New corporation tax payment dates will apply to companies with annual taxable profits of at least £20 million for accounting periods commencing on or after 1 April 2017. Corporation tax will be due in four quarterly installments in the third, sixth, ninth and twelfth months of the current accounting period. The £20 million threshold will be reduced proportionately where there are associated companies. This measure will not be included in the Finance (No.2) Bill 2015 and draft legislation will be published in the autumn.

Currently, companies with annual profits of at least £1.5 million are required to pay corporation tax in quarterly installments in the seventh and tenth months of the current accounting period and the first and fourth months after the end of the accounting period (see Practice note, Corporation tax: general principles: Payment of tax).

(See HM Treasury: Summer Budget 2015, paragraphs 1.211 and 2.118.)

The Finance (No. 2) Bill 2015 will set the annual investment allowance (AIA) cap at £200,000 with effect from 1 January 2016. The government stated that it is committed to maintaining this cap for the rest of the current Parliament.

The AIA operates by providing a 100% allowance for qualifying expenditure up to the specified annual cap. The current annual cap of £500,000 was due to expire on 31 December 2015 when it would revert to £25,000. The cap has been subject to regular changes since the introduction of the AIA in April 2008. In line with previous changes, transitional rules will operate to apportion the AIA between different chargeable periods where the taxpayer's chargeable period spans 1 January 2016. (For more information on the AIA, see Practice note, Capital allowances on property transactions: Annual investment allowance.)

(See HMRC: Annual Investment Allowance: permanent increase to £200,000: TIIN and HM Treasury: Summer Budget 2015, paragraphs 1.242 and 2.120.)

The government will publish, by April 2016, a roadmap setting out its plans for business taxes over the course of this Parliament, with the aim of enabling businesses to plan and make long term investments.

(See HM Treasury: Summer Budget 2015, paragraphs 1.244 and 2.125.)

UK resident companies subject to a controlled foreign company (CFC) charge will no longer be able to set current and carry-forward losses and surplus expenses or group relief against the CFC charge. This will apply to profits arising on or after 8 July 2015. For CFC accounting periods straddling this date, the CFC profits (and the related CFC charge) will be apportioned on a just and reasonable basis. Therefore, CFC profits (and the related CFC charge) apportioned to the period before commencement will remain eligible for offset. These measures will be effected by repealing section 371UD of the Taxation (International and Other Provisions) Act 2010 (and making consequential changes).

The government says that this will improve the effectiveness of the UK CFC regime in countering "aggressive tax planning" (by deterring UK resident companies from diverting profits from the UK). Additionally, changes will be made to the anti-avoidance rules in Part 14B of the Corporation Tax Act 2010 (as to which, see Legal update, March 2015 Budget: key business tax announcements: Preventing corporation tax loss "refreshing") to ensure that those rules also apply to arrangements involving the use of carried-forward losses to reduce or avoid a CFC charge. These measures will apply to accounting periods beginning on or after 8 July 2015, with time apportionment applying to accounting periods straddling this date (unless this would produce an unfair result, in which case apportionment is to be on a just and reasonable basis). For more information on the CFC regime, see Practice notes, Controlled foreign companies (new regime): overview and Controlled foreign companies: the new regime.

Draft legislation has been published, which will be included in the Finance (No. 2) Bill 2015.

(See HMRC: Controlled foreign companies: loss restriction: TIIN (including draft legislation) and HM Treasury: Summer Budget 2015, paragraphs 1.176 and 2.177.)

As announced in the 2014 Autumn Statement, the requirements regarding the location of link companies for the purposes of consortium relief will be removed with effect from 10 December 2014. A Tax Information and Impact Note (TIIN), identical in substance to the TIIN published at the time of the 2014 Autumn Statement, indicates that legislation will be introduced in the Finance (No. 2) Bill 2015.

For background to the measure, see Legal update, 2014 Autumn Statement: business tax implications: Consortium relief: removal of location of link company requirements and Tax legislation tracker: corporate: Consortium relief: non-resident link companies.

(See HM Treasury: Summer Budget 2015, paragraph 2.160 and HMRC: Corporation tax: simplifying "link company" requirements for consortium claims: TIIN.)

Draft legislation, which will be included in the Finance (No. 2) Bill 2015, proposes the removal of corporation tax relief for the costs incurred by a company in purchasing goodwill. Currently, relief is given for expenditure written off in accordance with GAAP (or at a fixed rate of 4%, if the company so elects). This is subject to the rules introduced by sections 849B to 849D of the Corporation Tax Act 2009 (CTA 2009), which denies relief for acquisitions of goodwill from related individual or firm (see Legal update, Finance Bill 2015: corporation tax relief restricted on goodwill transfers to related companies).

Part 8 of the Corporation Tax Act 2009 will be amended to remove relief for debits for all purchased goodwill and customer related intangible assets unless they relate to acquisitions made before 8 July 2015 (or acquisitions made afterwards under an unconditional obligation entered into before then). Additionally, Part 8 will also be amended to treat any debits arising on disposals of such assets (made on or after 8 July 2015) as non-trading debits. This will limit how such debits may be relieved (in particular, such debits will not be included in computing trading losses). These amendments also mean that sections 849B to 849D of the CTA 2009 will be repealed.

Intangibles relief for purchased goodwill is one factor that may point a buyer towards acquiring the target business rather than the target company (see Practice note, Share purchase or asset purchase: tax issues: Tax advantages of an asset purchase for the buyer). The government says that removing the advantage for asset purchases will bring the UK into line with other major economies and create a more level playing field for merger and acquisition transactions.

(See HMRC: Restriction of corporation tax relief for business goodwill amortisation: TIIN (including draft legislation) and HM Treasury: Summer Budget 2015, paragraphs 1.210 and 2.124.)

The Finance (No. 2) Bill 2015 will contain legislation ensuring that transfers of intangible fixed assets between related parties and certain transfers of trading stock, all of which are within the scope of the transfer pricing rules, remain subject to further adjustment under the rules that treat these transfers as occurring at market value. The provisions ensure that, between them, the amended rules will bring into overall charge no less than the market value of the trading stock or intangible asset transferred. The measure will have effect for a disposal or acquisition made on or after 8 July 2015, unless it is made under a contractual obligation that was unconditional before that date.

The following transactions are treated as taking place at market value:

However, if they apply, the transfer pricing rules in the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) take precedence over all of those provisions. The outcome under transfer pricing could be lower than the market value that given by CTA 2009 or ITTOIA 2005 so that the full market value might not be brought into account.

The government will amend ITTOIA 2005 and CTA 2009 to prevent attempted avoidance. The amendments are designed to ensure that, if the transfer pricing rules in TIOPA 2010 apply to the acquisition or disposal (whether or not those rules actually give an adjustment), there can also be a further adjustment under CTA 2009 or ITTOIA 2005 to ensure that the acquisition or disposal proceeds are recognised at full market value.

(See HM Treasury: Summer Budget 2015, paragraph 2.178 and HMRC: Disposal of stock other than in trade, and corporate intangibles: TIIN (including draft legislation).)

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 Tax legislation tracker: compliance, disputes and investigations: Closure of aspect of tax enquiry.)

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.)

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 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.)

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 legislation will take effect from Royal Assent.

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

The government has announced the following measures to improve tax compliance by businesses:

(See HM Treasury: Summer Budget 2015, paragraphs 1.174, 1.175 and 2.176, HM Government: Summer Budget 2015: policy costings, pages 35 and 43 and HM Treasury: Chancellor George Osborne's Summer Budget 2015 speech.)

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

The Finance Bill 2016 will provide that, for 2019-20, the appropriate percentage of a company car's list price subject to tax will increase by 3 percentage points for cars emitting more than 75 gCO2/km, to a maximum of 37%. There will be a 3 percentage point differential between the 0-50 and 51-75 gCO2/km bands, and between the 51-75 and 76-94 gCO2/km bands. This measure was announced as part of the March 2015 Budget (see Tax legislation tracker: employment: Company car rates (2016-17 to 2019-20)).

(See HM Treasury: Summer Budget 2015, paragraph 2.149.)

HMRC has published for consultation four sets of draft regulations to amend the Income Tax (Pay as you Earn) Regulations 2003 (SI 2003/2682) to implement the detail of the following simplification measures identified by the Office of Tax Simplification:

(The Finance Act 2015 made the necessary legislative changes to the Income Tax (Earnings and Pensions) Act 2003. For background see Practice note, Taxation of employees: benefits and expenses: Office of Tax Simplification review of benefits and expenses.)

The draft regulations to implement voluntary payrolling confirm that authorised employers may deduct tax on the cash equivalent value of certain benefits through payroll. Employers that wish to payroll benefits (accommodation, beneficial loans and credit tokens and vouchers are excluded) must apply to HMRC for authorisation (generally before the start of the relevant tax year). Employers must specify the benefits they wish to payroll. Accordingly, it will be possible to specify some but not all eligible benefits. Once authorised, the employer must calculate the cash equivalent value of the benefit and divide that value by the number of pay periods in the tax year. That amount is added to the employee's cash pay for each pay period and tax deducted accordingly. The employer is not required to submit annual returns for benefits that are payrolled. The draft regulations also deal with employees leaving part way through the tax year, employees having insufficient salary to cover their tax liability in a period, employees making good (or not making good) some or all of the benefit and employers withdrawing from voluntary payrolling. (There will be additional reporting requirements for employers payrolling car benefits.)

The draft tax exemption regulations provide a maximum allowance for meals purchased by employees in the course of qualifying travel. Provided the allowances are not exceeded the expense is exempt from tax and is not reported to HMRC. Conversely, employers will be required to operate PAYE on expenses that are not exempt. Draft regulations, therefore, remove the need for employers to report the expense on the annual P11D.

The draft regulations dealing with the abolition of the £8,500 threshold simply remove the requirement to file form P9D.

The final regulations will apply from 6 April 2016. The closing date for comments is 2 September 2015.

In addition, the government will review the rules underlying the tax treatment of travel and subsistence expenses. A discussion paper will be published shortly.

(See HMRC: Draft legislation: review of employee benefits and expenses and HM Treasury: Summer Budget 2015, paragraph 2.165.)

The government will consult on the use of unfunded Employer-financed retirement benefits scheme to obtain a tax advantage in relation to remuneration.

(See HM Treasury: Summer Budget 2015, paragraph 2.80.)

The Chancellor has announced that HMRC is to consult further on possible reforms to the IR35 legislation as personal service companies are still seen as vehicles for avoiding tax through disguised employment. The consultation document will be released shortly.

For background on the existing legislation, see Practice note, IR35.

(See HM Treasury: Summer Budget 2015, paragraph 1.180, 1.181 and 2.183.)

The government will ask the Office of Tax Simplification 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, paragraph 2.158.)

The government will introduce legislation in the Finance (No. 2) Bill 2015 to exempt from income tax and employee NICs travel expenses paid to councillors by their local authority. The measure will take effect from 6 April 2016.

The measure was first announced on 22 July 2014 and confirmed in the 2014 Autumn Statement, but was omitted from the Finance Act 2015. For background, see Legal update, Tax and NICs exemption for local councillor travel expenses and Tax legislation tracker: employment: Local councillors' travel expenses.

(See HMRC: Tax exemption for travel expenses of members of local authorities: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.70.)

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 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, 1.241, 2.61 and 2.62.)

The government will "actively monitor" the growth of salary sacrifice schemes. The government notes that salary sacrifice arrangements have become more popular and therefore their cost to the taxpayer is increasing.

For more information about salary sacrifice arrangements, see Practice note, Salary sacrifice arrangements.

(See HM Treasury: Summer Budget 2015, paragraphs 1.197 and 2.66.)

The government will consult in Summer 2015 on simplifying the tax and NICs treatment of termination payments. In its final report on employee benefits and expenses, published in July 2014, the OTS made a number of recommendations relating to termination payments, including that the current £30,000 exemption should be replaced with a new income tax relief that is available in the case of statutory redundancy.

For more information, see Practice note, Taxation of termination payments: Reform.

(See HM Treasury: Summer Budget 2015, paragraphs 1.246 and 2.164.)

The Chancellor announced that he would be tackling the unfairness that permits individuals who are placed with an end client to claim tax free reimbursement of home to work travel expenses on short term assignments whereas, were they hired directly by the end client, there would be no tax free allowance. With effect from 6 April 2016, such payments will be taxable and subject to NICs if the worker is, or could be, under the right of direction, supervision or control of any person. This change will be introduced by the Finance Bill 2016.

A consultation document, published alongside the July 2015 budget, sets out proposals for each placing of a worker with an end client to be treated as a separate engagement and for reimbursed expenses to be treated as earnings. The provisions will apply to workers supplied through employment businesses, umbrella companies and personal service companies. They will not apply to workers from professional service firms who are seconded to clients, as the firms are not in the business of supplying labour. Similarly, individuals who are not under the direction, supervision or control of any person and are supplied by a PSC will not be caught. Intermediaries that fail to account for tax and NIC will render themselves liable for the sums due. Comments are invited by 30 September 2015.

Under the current legislation, the existence of an overarching employment contract with an umbrella company brings each successive workplace within the temporary workplace rules (see Practice note, Taxation of employees: travel and subsistence expenses: overview).

(See HMRC: Employment intermediaries and tax relief for Travel and Subsistence: Consultation document and HM Treasury: Summer Budget 2015, paragraph 2.182.)

It is confirmed that the tax exemption for trivial benefits in kind costing less than £50 will be introduced in the Finance Bill 2016 and will take effect from 6 April 2016. (The original commencement date was April 2015.) For background and to track the progress of the exemption to implementation, see Tax legislation tracker: employment: Review of employee benefits and expenses

(See HM Treasury: Summer Budget 2015, paragraph 2.161.)

There were very few announcements directly relevant to share schemes, other than a minor change to the EMI options rules to make farming an excluded activity wherever it takes place.

For more detail and for other measures of interest to shares schemes practitioners, see Legal update, July 2015 Budget: share schemes and incentives implications.

The government has confirmed that it is to proceed with its reform of the loan relationships and derivatives rules (as to which, see Practice notes, Loan relationships and Derivatives: tax). Legislation effecting this will be included in the Finance (No. 2) Bill 2015 (except in relation to late paid interest, the legislation for which was enacted in the Finance Act 2015: see Practice note, Loan relationships: Late paid interest).

Draft legislation introducing the changes was published on 10 December 2014. For details of that draft legislation, see Legal update, Draft Finance Bill 2015 changes to loan relationships and derivative contracts rules. To track the genesis of the reform, see Tax legislation tracker: finance: Reform of loan relationship and derivative contract rules.

The update given as part of the July 2015 Budget is light on detail, so it is not clear whether many (or, indeed, any) substantive changes have been made to the draft legislation.

However, while most of the new provisions will have effect for accounting periods beginning on or after 1 January 2016 (as previously proposed), it is important to note that the start dates for the various anti-avoidance provisions (including the regime anti-avoidance rule: see Legal update, Draft Finance Bill 2015 changes to loan relationships and derivative contracts rules: Regime anti-avoidance rule) and the corporate rescue provisions (see Legal update, Draft Finance Bill 2015 changes to loan relationships and derivative contracts rules: Corporate rescues) have been moved from 1 April 2015 or 1 January 2015 (respectively) to the date of Royal Assent to the Finance (No. 2) Bill 2015. For details of the affected provisions, see Legal update, Draft Finance Bill 2015 changes to loan relationships and derivative contracts rules: Summary of commencement provisions.

In addition to the Finance (No. 2) Bill 2015 provisions, further changes are to be made to the corporate debt and derivatives tax rules in 2015 through secondary legislation. This will include updating the rules on foreign exchange hedging, convertible instruments and property-based derivatives.

(See HMRC: Corporation tax: modernisation of the taxation of corporate debt and derivative contracts: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.123.)

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. It will take effect from 6 April 2015.

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 Legal updates, 2014 Autumn Statement: business tax implications: Peer-to-peer lending: withholding and bad debt relief, March 2015 Budget: key business tax announcements: Peer-to-peer lending: bad debt relief and Peer-to-peer lending: bad debt relief technical criteria. See also Tax legislation tracker: finance: Peer-to-peer lending.

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

The government is to reduce the bank levy rates from 1 January 2016 to 1 January 2021 in the Finance (No. 2) Bill 2015. The new full rates (applying to short-term chargeable liabilities) are to be:

In each case, the reduced rate (for long-term equity and liabilities) is to be half of the full rate (as at present). Although not explicitly stated in the announcement, it may be expected that periods straddling these dates will be deemed to be split for these purposes as this is the approach that is usually adopted for bank levy rate changes.

Also from 1 January 2021, the bank levy, which currently applies to worldwide balance sheets, will be restricted to UK balance sheets of UK headquartered banks.

Further, relief will be provided against the UK bank levy for payments made to the Eurozone Resolution Fund, the aim being to avoid double imposition. Affected banks will be able to claim relief from 1 January 2016.

For details of the bank levy rules, see Practice note, Bank levy.

In isolation, the banking sector will welcome these changes as they greatly reduce the cost of the levy and, by setting out the rates in advance, increase certainty. However, the changes are being introduced in conjunction with the new banking corporation tax surcharge, which is forecast to lead to an overall increase in bank taxation (see Bank corporation tax surcharge).

(See HMRC: Bank levy: rate reduction: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.201-1.205 and 2.127-2.128, HM Treasury: Chancellor George Osborne's Summer Budget 2015 speech and HM Government: Summer Budget 2015: policy costings, page 16.)

The Finance (No. 2) Bill 2015 will introduce a new corporation tax surcharge on the profits of banking companies and building societies within the charge to UK corporation tax for accounting periods beginning on or after 1 January 2016 (with straddling periods deemed to be split for these purposes). The rate of the surcharge will be 8%.

The surcharge will apply to the same profits as corporation tax except that the following reliefs will be added back:

The surcharge also applies to amounts subject to a CFC charge (as to which, see Practice note, Controlled foreign companies: the new regime).

There is to be an annual allowance of £25 million per group (or per company if a banking company is the sole banking company in a group or is not a group member). Unused allowances will not be carried forward.

The legislation introducing the surcharge is to include an anti-avoidance rule negating the effects of arrangements seeking to avoid or reduce the surcharge (regardless of when these are entered into). However, further details are not yet known.

The surcharge will be treated as corporation tax and double tax relief will be applicable, if appropriate, on a similar basis as for corporation tax. The surcharge will be payable alongside normal corporation tax payments. If a company pays corporation tax by instalments, any surcharge element of an instalment due before 1 January 2016 will be deemed to be due at the first instalment date in 2016. If a company makes a payment to HMRC that includes (or consists of) an amount of surcharge, it must notify HMRC of the amount of the surcharge.

Groups will need to nominate a member (a banking company) to make a statement to HMRC of how its annual allowance will be used for each period, including details of the benefiting banking companies and their allowance allocations. If a banking company is not in a group, no statement is required.

Although this measure is stated to be linked to the reduction in the rate of, and restriction of, the bank levy (see Bank levy reduction and restriction), and will go some way to increasing certainty as to banks' tax liability, the government forecasts an overall tax burden of around £2 billion between 2016 and 2021 (although the amount of the burden for each of those years is to fall from £415 million in 2016-17 to £105 million in 2020-21, reflecting the gradual decrease in the bank levy rate). However, this forecast is acknowledged as highly uncertain, given the complexity of modelling projected bank profits.

(See HMRC: Bank Corporation Tax surcharge: TIIN, HM Treasury: Summer Budget 2015, paragraphs 1.201-1.204 and 2.126, HM Treasury: Chancellor George Osborne's Summer Budget 2015 speech and HM Government: Summer Budget 2015: policy costings, page 16.)

Legislation will be introduced to prevent banks and building societies from claiming a corporation tax deduction for compensation payments made to customers relating to misconduct. The measure was announced in the 2015 Budget and consulted on between 26 March 2015 and 29 May 2015. For background, see Legal update, Consultation on denying tax relief for banks' compensation expenditure and Tax legislation tracker: finance: Denial of deductions for compensation payments.

The Finance (No. 2) Bill 2015 will insert new sections 133A - 133M into the Corporation Tax 2009 introducing the restriction. The measure will apply to companies that are, broadly, at the time the expenditure is incurred, carrying on a trade as a retail or investment bank, and to compensation payments made indirectly through associated companies and third parties. Only expenditure incurred as a result of an issue relating to the bank's conduct that has been disclosed in certain specified documents will be caught by the new rules. Compensation relating to administrative issues, or caused by electronic or computer failure will be excluded. Certain companies, such as insurance companies and friendly societies are exempt from the restriction.

Companies with expenses that are disallowed by the new rules will also be required to bring into account in calculating taxable profits a notional receipt equal to 10% of the compensation disallowed, to reflect the administrative and other costs of making a compensation payment.

The measure will apply to expenditure arising on or after 8 July 2015 and any expenditure incurred in an accounting period straddling that date must be apportioned on a just and reasonable basis.

(See HM Treasury: Summer Budget 2015, paragraph 1.206 and HMRC: Restricting tax relief for banks' compensation payments: TIIN (including draft legislation).)

The Finance Act 2015 introduced restrictions on relief for carried-forward trading losses and other amounts of banks and building societies, but with a £25 million allowance for groups headed by a building society (see Practice note, Tax for banking lawyers: Restricted loss relief). As part of the July 2015 Budget, the government announced that the Finance (No. 2) Bill 2015 will extend this allowance to savings banks established under the Savings Bank (Scotland) Act 1819 with effect from 1 April 2015 (the start date of the restrictions). The rationale for this is that such savings banks share many characteristics with building societies and so should be treated in the same way for these purposes.

(See HMRC: Corporation tax: extending carried-forward loss allowance to savings banks established under the Savings Bank (Scotland) Act 1819: TIIN and HM Treasury: Summer Budget 2015, paragraph 2.131.)

In the Finance (No. 2) Bill 2015, the government will update the definition of a banking company (including a building society) used in UK tax legislation to reflect changes to regulatory definitions.

This change will apply to the rules on the bank levy (from 1 January 2014, although the summary in the Overview of tax legislation and rates states 1 April 2014) and restricting relief for banks' losses (from 1 April 2015). For details of these rules, see Practice notes, Bank levy and Tax for banking lawyers: Restricted loss relief.

The definitions of a banking company used in these provisions refer to definitions in the Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU), which have now been superseded (although they remain in the glossary of the handbook of the Prudential Regulation Authority (PRS), so can still be used). On 1 January 2014, the EU introduced the Capital Requirements Regulations (CRR), introducing a new regulatory code for credit institutions and investment firms (see Practice note, CRD IV: Capital Requirements Regulation (CRR)). This replaced BIPRU. From this point, the financial regulators have used the CRR as the regulatory code for banks and building societies, rather than BIPRU. (The PRA implemented the CRR directly and the Financial Conduct Authority (FCA) introduced a new Prudential Sourcebook for investment firms (IFPRU).)

To maintain the existing application of the bank levy and the bank loss restriction rules, this measure will amend the existing legislation to refer to current definitions of firms supervised by either the PRA or the FCA. The government states that this change is for clarity only, and that the amended legislation will continue to apply to the same population and in the same manner.

(See HMRC: Updating bank definitions: TIIN, HM Treasury: Summer Budget 2015, paragraph 2.130 and HM Treasury and HMRC: Overview of tax legislation and rates.)

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 Consultation: tax treatment of fund managers' performance-related returns).

We can gather two things from this development:

(See HM Treasury: Summer Budget 2015, paragraphs 1.177 and 2.179 and HMRC: Capital gains tax treatment of carried interest: TIIN (including draft legislation).)

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 HM Treasury: Summer Budget 2015, paragraph 1.178 and HMRC: Taxation of performance linked rewards paid to asset managers: Consultation document.)

The government has announced that it will consult on "technical changes" to limited partnership legislation to enable private equity and venture capital investment funds to use a limited partnership structure more effectively.

As no further details are given, it is not clear whether these changes will be tax-related. However, this announcement could relate to the government's 2013 Budget proposal to allow limited partnerships to opt to have legal personality (see Tax legislation tracker: investment structures: Limited partnerships: optional legal personality).

For more information about using limited partnerships as funds, see Practice note, Limited partnerships: tax.

(See HM Treasury: Summer Budget 2015, paragraph 2.184.)

The government confirmed that the Finance Bill 2016 will introduce a new corporation tax relief for orchestras. The relief will apply at a rate of 25% on qualifying expenditure from 1 April 2016.

This measure was originally announced in the 2014 Autumn Statement and, following a consultation launched on 23 January 2015, was confirmed in the March 2015 Budget (see Tax legislation tracker: intellectual property: Orchestra relief).

(See HM Treasury: Summer Budget 2015, paragraph 2.119.)

The Chancellor announced that the R&D tax credit legislation will 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 and will be included in the Finance (No.2) Bill 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.)

With effect from autumn 2015, the cluster area and basin-wide investment allowances will be expanded so that the definition of investment expenditure will include certain discretionary operating expenditure and leasing of production vessels. The aim is to maximise economic recovery in the oil and gas sector.

Both the cluster area allowance and the basin-wide investment allowance were introduced by the Finance Act 2015. The cluster area allowance removes an amount equal to 62.5% of qualifying capital expenditure that a company incurs in relation to a cluster from its adjusted ring fence profits for the purposes of the oil and gas supplementary charge (see Practice note, Oil and gas taxation: Cluster area allowance). The basin-wide investment allowance operates in a similar manner so that an amount equal to 62.5% of qualifying capital expenditure is removed from the company's adjusted ring fence profits, provided that the expenditure has not qualified for the cluster area allowance (see Practice note, Oil and gas taxation: Basin-wide investment allowance).

The changes will be made by statutory instrument.

(See HM Treasury: Summer Budget 2015, paragraphs 1.261 and 2.132.)

The government will introduce legislation in the Finance Bill 2016 to clarify how the simplified expenses rules in the Income Tax (Trading and Other Income) Act 2005 apply for partnerships in respect of the use of a home and when business premises are also a home. Draft legislation was published at the time of the draft Finance Bill 2015 (see Legal update, Draft Finance Bill 2015 legislation: key business tax measures: Fixed-rate deductions for use of home for business purposes: partnerships and Tax legislation tracker: miscellaneous: Home use by partners: fixed rate deductions).

(See HM Treasury: Summer Budget 2015, paragraph 2.162.)

The government has confirmed its announcement in the March 2015 Budget that it will consult in Autumn 2015 on the abolition of Class 2 NICs and the reform of Class 4 NICs. For background, see Legal update, March 2015 Budget: key business tax announcements NICs: Class 2 to be abolished and Class 4 to be reformed and Tax legislation tracker: owner-managed business: Abolition of Class 2 NICs and reform of Class 4 NICs.

(See HM Treasury: Summer Budget 2015, paragraphs 1.246 and 2.163.)

The government has announced that it will ask the Office of Tax Simplification (OTS) to review the taxation of small companies. The OTS has previously carried out work on the taxation of small businesses (covering disincorporation relief, simplifying administration and simpler income tax: see Practice note, Disincorporating a small company: tax, and Legal updates, Small business taxation and HMRC administration: OTS publishes final report and Small business taxation simplification: OTS publishes final report). However, it is not clear as yet exactly what the scope of the new review will be.

(See HM Treasury: Summer Budget 2015, paragraph 2.159.)

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 TIIN 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-intensive was £15 million.

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

(See HM Treasury: Summer Budget 2015, paragraphs 1.243 and 2.71 to 2.73, HM Treasury and HMRC: Tax-advantaged venture capital schemes: response to the consultation on ensuring continued support for small and growing businesses and HMRC: Income Tax: amendments to tax-advantaged venture capital schemes: TIIN.)

The personal income tax 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 of the Exchequer 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 and HM Treasury: Summer Budget 2015, paragraphs 1.131 to 1.134 and 2.54 to 2.56.)

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.)

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 ISAs. 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 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 Legal update, July 2015 Budget: key private client tax announcements: IHT on UK residential property owned indirectly by non-domiciled individuals. For the impact of this measure on the remittance basis, see Legal update, July 2015 Budget: key private client tax announcements: 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 90.)

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 by banks and building societies on non-ISA savings on the same date that the measure is introduced. There will be a public consultation in Summer 2015 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.

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

For private client and charities tax measures, including the increased IHT allowance for the main residence, see Legal update, July 2015 Budget: key private client tax announcements.

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.)

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.)

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 and HM Treasury: Summer Budget 2015, paragraph 2.59.)

The government will introduce legislation in the Finance Bill 2016 to:

The government consulted on these measures in July 2014 and confirmed its intention to introduce them in the 2014 Autumn Statement and the March 2015 Budget. For further background, see Legal update, March 2015 Budget: key business tax announcements: SDLT seeding relief for PAIFs and co-ownership ACSs and Tax legislation tracker: property, energy and environment: PAIFs seeding SDLT relief.

(See HM Treasury: Summer Budget 2015, paragraph 2.154.)

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.)

See also Legal updates:

In a brief announcement, the government has said that it will apply "use and enjoyment" rules to ensure that all UK repairs made under UK insurance contracts are subject to VAT. This measure will prevent UK insurance companies receiving repair services at overseas establishments on a VAT-free basis. Under the use and enjoyment rules such services will be treated as supplied in the UK and, therefore, subject to VAT. This measure will take effect from April 2016. Additionally, the government will "consider" a wider review of off-shore based VAT avoidance undertaken by taxpayers in the exempt sectors, with a view to introducing use and enjoyment measures for certain services such as advertising.

Effective use and enjoyment is where the customer consumes services and this determines the place of supply rather than where the supplier or customer belongs (and irrespective of the contractual arrangements). For example, use and enjoyment rules determine the place of supply of telecommunications and broadcasting services.

(See HM Treasury: Summer Budget 2015, paragraph 2.136 and Summer Budget 2015: policy costings, page 34.)

The government has announced that it will introduce legislation in the Finance Bill 2016 to enable eligible public bodies to receive refunds of VAT incurred on specified shared services.

For background on VAT generally, see Practice note, Value added tax.

(See HM Treasury: Summer Budget 2015, paragraph 2.137.)

From 1 November 2015, the standard rate of insurance premium tax (IPT) will increase from 6% to 9.5%. Insurers using the IPT cash accounting scheme will need to charge IPT on premiums at 9.5% from 1 November 2015. However, for insurers using the special accounting scheme, there will be a 4 month concessionary period (1 November 2015 to 29 February 2016), during which premiums for policies entered into before 1 November 2015 will continue to be liable to IPT at 6%. From 1 March 2016 insurers will need to charge IPT at the new 9.5% rate, regardless of when the policy was entered into.

These changes will be introduced in the Finance (No. 2) Bill 2015.

This is the first increase in the standard rate of IPT since 2011. For more information on IPT, see Practice note, Insurance premium tax.

(See HM Treasury: Summer Budget 2015, paragraphs 1.209 and 2.133 and HMRC: Insurance Premium Tax: increase to standard rate: TIIN.)

The government will introduce legislation in the Finance Bill 2016 to establish the Office of Tax Simplification (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.)

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.)