The government confirmed that provisions will be included in the Finance Bill 2014 to require taxpayers, for whom there is an open enquiry or matter under appeal, to pay disputed tax up front where the taxpayer has claimed a tax advantage by the use of arrangements that fall to be disclosed under the DOTAS rules or HMRC counteracts the tax advantage under the GAAR. (For the DOTAS and GAAR rules, see Practice notes, Disclosure of tax avoidance schemes under DOTAS: direct tax and General anti-abuse rule (GAAR).)

The proposal to widen the circumstances in which HMRC will require taxpayers to pay disputed tax up front in avoidance cases was announced in January 2014 (see Legal update, Tax avoidance schemes: judicially defeated schemes and extended information powers: Finance Bill 2014 clauses: Accelerated payments: DOTAS and GAAR schemes and Accelerated payment of disputed tax: judicially defeated schemes).

Draft legislation to implement this measure has yet to be published but is expected in the Finance Bill 2014 to be published on 27 March 2014.

The measure will have effect from the date the Finance Bill 2014 receives Royal Assent. In its original announcement, HMRC confirmed that it will issue a list of DOTAS schemes for which an accelerated payment notice will be issued. Payment of the disputed tax will be required within 90 days (presumably, from the date HMRC issues the notice) or, if taxpayers ask HMRC to reconsider the amount of the payment, within 30 days (again, presumably, from the date HMRC issues the fresh or confirmatory notice). Late payment will give rise to penalties. If the taxpayer is ultimately successful, HMRC will repay the disputed tax with interest.

(See TIIN: Accelerated payments of tax associated with schemes covered by the DOTAS rules or counteracted under the GAAR, HM Treasury: 2014 Budget, paragraphs 1.200 and 1.201, Overview, paragraph 1.64 and HM Government: Budget 2014: policy costings, page 36.)

The government confirmed that legislation will be introduced in the Finance Bill 2014 to empower HMRC to require taxpayers to make accelerated payment of tax in avoidance cases where the same (or a similar) scheme or tax arrangement has been judicially defeated in another party's litigation.

Draft legislation was published for consultation in January 2014 (see Legal update, Tax avoidance schemes: judicially defeated schemes and extended information powers: Finance Bill 2014 clauses).

As expected, the legislation is to take effect from the date that the Finance Bill 2014 receives Royal Assent and will apply to all cases where there is an open enquiry or open appeal after the date of Royal Assent.

(See TIIN: Amendment of return to take account of relevant judicial ruling and accelerated payments of tax in follower cases and Overview, paragraphs 1.63 and 1.64.)

The government confirmed that legislation will be introduced in the Finance Bill 2014 to implement the high-risk promoters proposals consulted on in January 2014. Under the proposals, HMRC will be empowered to issue "conduct notices" to promoters who meet a threshold condition, and monitor promoters who breach a condition of the notice. A monitored promoter will be subject to new disclosure obligations, may be named by HMRC and will be required to inform clients that they are monitored and of their promoter reference number. For further details of the proposals, see Legal update, Tax avoidance schemes and high-risk promoters: Finance Bill 2014 clauses. The government has confirmed that, following the consultation, the definitions, appeal rights, and the threshold conditions have been revised. Revised draft legislation has yet to be published and is expected in the Finance Bill 2014 to be published on 27 March 2014.

The government also confirmed that measures to improve the direct tax DOTAS regime (as to which, see Practice note, Disclosure of tax avoidance schemes under DOTAS: direct tax) will be introduced in secondary legislation and in the Finance Bill 2015. The improvements will include measures to refine existing, and introduce new, hallmarks, and to strengthen the penalties for non-disclosure. Additionally, the government will consult on changes to the VAT disclosure regime (as to which, see Practice note, VAT disclosure regime), to align it more closely with the DOTAS regime.

(See HM Treasury: 2014 Budget, paragraphs 1.202, 2.187, 2.189 and 2.190 and Overview, paragraphs 1.62, 2.27 and 2.28.)

As announced in the 2013 Autumn Statement, the Finance Bill 2014 will include legislation to prevent avoidance involving partnerships. For details of the proposals, see Legal update, 2013 Autumn Statement: business tax implications: Partnerships and avoidance).

Following the publication of draft legislation at Autumn Statement, the government published a revised draft of the rules for salaried members of limited liability partnerships on 7 March 2014 (see Legal update, Salaried members rules for LLPs: revised Finance Bill 2014 clauses). However, it appears that further amendments (although it is not clear to what aspects of the proposed rules) can be expected: the Overview states that "a number of minor amendments have been made to other elements of the legislation" and indicates that the government will publish a further draft of the rules as part of the Finance Bill 2014, along with revised guidance.

(See HM Treasury: 2014 Budget, paragraph 2.197 and Overview, paragraph 1.57.)

As part of the 2014 Budget, HM Treasury and HMRC have published a position paper on the OECD Base Erosion and Profit Shifting (BEPS) Action Plan. This Action Plan proposes 15 Actions to be taken to strengthen international tax rules. For details of the Action Plan, see Articles, The OECD's Action Plan on Base Erosion and Profit Shifting and The OECD’s action plan on BEPS: a taxing problem. See also Legal updates, OECD: draft guidance on transfer pricing documents and country-by-country reporting and BEPS: OECD discussion paper on preventing treaty abuse.

The position paper sets out the approach that the UK government intends to take in developing the Actions. Notable points from the paper include the following:

(See HM Treasury and HMRC: Tackling aggressive tax planning in the global economy: UK priorities for the G20-OECD project for countering Base Erosion and Profit Shifting.)

The Finance Bill 2014 will contain legislation that provides that if the profits of a group company are, in substance, transferred to a different group company and a main purpose of that is to secure a tax advantage, the transfer will be ignored for purposes of computing the transferor company's (but not the transferee's) corporation tax. The measure has effect for payments made on or after 19 March 2014.

The measure is designed to stop marketed schemes that circumvent the anti-avoidance rule that denies deductions for payments under derivatives that are essentially transfers of profit (derivative rule). That legislation was published in draft as part of the 2013 Autumn Statement but revised in January 2014. It will also be included in the Finance Bill 2014 but is effective from 5 December 2013. For more detail, see Legal update, Avoidance using total return swaps: revised Finance Bill 2014 clauses.

The legislation is accompanied by guidance that states, among other things:

This new measure is stated to complement the derivative rule as a broader response to arrangements that have the same economic characteristics as those affected by that rule but which use something other than derivatives. Some may ask why the government was not able to anticipate the derivative rule's circumvention and announce something wider in the first place. One of the reasons why the shares as debt legislation became the disguised interest rules was because taxpayers replaced shares with other instruments to escape the shares as debt rules (see Practice notes, Shares as debt: tax and Disguised interest: tax). In the age of tax simplification, a more considered approach would reduce the amount of legislation on the statute book.

As a broader response, the measure is drafted widely. Taxpayers and their advisers will be concerned to ensure that it does not catch arrangements that it was not intended to, given that the only safe harbour is the absence of an avoidance motive. Unless the new measure is amended during the Finance Bill's passage through Parliament, much more comprehensive guidance will be needed to clarify the scope of the measure and reassure taxpayers.

(See TIIN, Avoidance schemes involving the transfer of profits, HMRC: Guidance on avoidance schemes involving the transfer of corporate profits: Technical note, HM Treasury: 2014 Budget, paragraph 1.205, Overview, paragraph 1.66 and HM Government: Budget 2014: policy costings, page 38.)

The Finance Bill 2014 will raise the annual investment allowance (AIA) cap to £500,000 (from £250,000). The new amount will apply to qualifying expenditure incurred between 1 April 2014 (for corporation tax) or 6 April 2014 (for income tax) and 31 December 2015. Currently, the AIA operates by providing a 100% allowance for qualifying expenditure up to the specified annual cap (see Practice note, Capital allowances on property transactions: Annual investment allowance).

The current annual cap of £250,000 was due to expire on 31 December 2014, whereupon it was to revert back to £25,000. These new measures will both increase the annual cap and postpone the date that it reverts back to £25,000 for one year.

The AIA has seen regular changes to the cap since its introduction 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 the date the AIA is increased (April 2014) or the date that it reverts back to £25,000 (December 2015).

This represents a significant benefit to small and medium size businesses able to make full use of the AIA.

(See TIIN, Annual investment allowance: increase to £500,000 for extended temporary period, HM Treasury: 2014 Budget, paragraph 2.107 and Overview, paragraph 1.20.)

The Finance Bill 2014 is to contain provisions under which the loan relationship and derivative contract rules will bring into account debits, as well as credits, when a company leaves a group after an intra-group transfer of a loan relationship or a derivative contract. (In relation to the current rules, under which an intra-group transfer is treated as tax neutral but there is a deemed disposal and reacquisition if the company leaves the group within six years of the transfer, see Practice note, Loan relationships: Degrouping charge.) This rule is to have effect for de-grouping events on or after 1 April 2014.

As previously announced, the Finance Bill 2014 will also contain provisions amending the bond fund rules in Chapter 3 of Part 6 of the Corporation Tax Act 2009 (see Legal update, Draft loan relationships legislation: bond funds draft guidance).

These changes derive from the government's ongoing review of the taxation of loan relationships and derivative contracts (see Practice notes, Loan relationships and Derivatives: tax). To track the progress of this review, see Tax legislation tracker: finance: Reform of loan relationship and derivative contract rules. The other previously-announced measure arising from this, regarding the application of the rules to partnerships has been deferred to the Finance Bill 2015 (see Legal update, Draft loan relationships legislation: partnerships and bond funds). The government is to publish a technical note on other aspects of the review shortly, with the other, main changes also to be included in the Finance Bill 2015.

(See TIIN, Modernising the taxation of corporate debt and derivative contracts, HM Treasury: 2014 Budget, paragraph 2.130 and Overview, paragraph 1.68.)

The legislation that permits the deferral of tax on chargeable gains on a disposal of business assets, the proceeds of which are invested in new replacement assets, will be amended to clarify that the relief is not available where, on a disposal of business assets by a company, the proceeds are reinvested in intangible fixed assets.

Part V of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) permits the tax charge arising on the disposal of business assets to be deferred where the proceeds of the disposal are reinvested in certain categories of replacement assets within a specified time period (see Practice note, Tax on chargeable gains: general principles: Rollover relief on replacement of business assets.) Schedule 29 of the Finance Act 2002 withdrew this relief for disposals by companies, the proceeds of which were invested in intangible fixed assets on or after 1 April 2002. However, these provisions were subsequently re-written into section 156ZB of the TCGA 1992 and the re-written legislation created some uncertainty.

The government therefore proposes to introduce legislation in the Finance Bill 2014 to amend section 156ZB of the TCGA 1992, with effect from 19 March 2014, to put the position beyond doubt. It will also introduce legislation in the Finance Bill 2014, in the form of new section 870A of the Corporation Tax Act 2009, to ensure that, where roll-over relief has been claimed before 19 March 2014 on disposals in these circumstances, the cost of the replacement asset(s) will, for accounting periods beginning on or after 19 March 2014, be reduced to prevent relief from being given twice. For accounting periods that straddle that date, the periods before and after 19 March 2014 will be treated as separate accounting periods.

(See TIIN, Chargeable gains roll-over relief: reinvestment in intangible fixed asset, HM Treasury: 2014 Budget, paragraph 2.120 and Overview, paragraph 1.18.)

The Finance Bill 2014 will extend the period in which 100% enhanced capital allowances (ECAs) are available in Enterprise Zones (EZs) by three years until 31 March 2020. Legislation will also include a power to make future extensions to the duration of ECA schemes by Treasury Order. ECAs are available to companies investing in qualifying plant and machinery on designated sites within EZs. These changes will have effect from Royal Assent to the Finance Bill 2014.

This change will be welcomed by businesses already located in EZs and may encourage other businesses to invest within EZs.

For more information on ECAs and EZs, see Practice notes, Capital allowances on property transactions: Enhanced capital allowances and Capital allowances on property transactions: Enterprise zones: plant and machinery allowances.

(See TIIN, Enterprise Zones: enhanced capital allowances, HM Treasury: 2014 Budget, paragraph 2.108 and Overview, paragraph 1.30.)

The Finance Bill 2014 will introduce a power for HM Treasury to use secondary legislation to create income tax (and corporation tax) exemptions for major sporting events.

Currently, the government creates these exemptions in a Finance Bill. For example, the Finance Bill 2014 will include an income tax exemption for any income received by a non-UK resident sportsperson as a result of their performance at the Glasgow Grand Prix 2014, or as a result of activity between 5 and 14 July 2014 to support or promote the event. This exemption is similar to those provided for other events in 2013 and 2014 (see Private client tax legislation tracker 2012-13: Glasgow Commonwealth Games: non-resident competitors and London Anniversary Games: non-resident competitors).

(See TIINs, Major sporting events: power to provide for tax exemptions and Glasgow Grand Prix, HM Treasury: 2014 Budget, paragraphs 2.72 and 2.73 and Overview, paragraphs 1.12 and 1.13.)

The Finance Bill 2015 will allow HMRC to recover tax and tax credit debts of £1,000 or more directly from taxpayer bank and building society accounts, including ISAs. These powers will be subject to rigorous safeguards.

The government will consult on the draft primary and secondary legislation on the implementation of the measure, including safeguards to prevent hardship.

This measure will modernise and strengthen HMRC’s powers to recover tax and tax credit debts. It will focus on debtors who owe at least £1,000 and have been contacted multiple times by HMRC to pay and refused to do so. A minimum aggregate balance of £5,000 will be left across all accounts, including ISAs, after the debt is recovered. The government will consult on the implementation of this measure shortly after the 2014 Budget.

As announced by the Chancellor in his 2014 Budget speech, this an approach already used in other Western tax regimes. It is paramount that this system is implemented safely and without compromising the rights and welfare of taxpayers or the integrity of the financial institutions, especially since the government recognises that the main risk is the matching of debtors to bank and building society details.

(See HM Government, Budget 2014: policy costings, page 39, HM Treasury: 2014 Budget, paragraph 2.203 and Overview, paragraph 2.30.)

The government will introduce a new online system to enable taxpayers in financial difficulty to set up a payment plan for self-assessed income tax. However, it has yet to announce details of the new system and the time-frame for its introduction.

For information on the current HMRC advice to taxpayers experiencing problems with paying income tax on time, see HM Revenue & Customs: What to do if you can't pay your tax bill and GOV.UK: If you can't pay your tax bill on time.

(See HM Treasury: 2014 Budget, paragraph 2.206.)

Finance Bill 2014 will include provisions to amend the sections of the Income Tax Act 2007 (ITA 2007) that deal with the Scottish rate of income tax (SRIT).

Sections 6(2A) to (2C) of the ITA 2007 will be repealed and replaced with new sections 6A and 11A. Although the calculation of the SRIT rates will remain the same, the new sections amend the structure of the provisions to allow for more straightforward implementation of proposals set out in a technical note published in 2012, which set out the government's policy intentions in situations where the SRIT interacts with other areas of the income tax system such as gift aid and pensions tax relief (see Legal update, Scottish rate of income tax: interaction with other areas of income tax system).

The amendments to the ITA 2007 are expected to take effect on 6 April 2016.

(See TIIN, Legislative changes resulting from the introduction of the Scottish rate of income tax, HM Treasury: 2014 Budget, paragraph 2.75 and Overview, paragraph 1.69.)

The government will legislate to provide for non-financial VAT registration data to be released in certain circumstances to certain qualified parties. The government has also indicated it will continue to consider options for the public release of some VAT registration data as open data.

HMRC consulted on sharing taxpayer data last year (see Legal update, HMRC consults on sharing taxpayer data).

(See HM Treasury: 2014 Budget, paragraph 2.210.)

The majority of the tax restrictions on how a member of a defined contribution pension scheme can draw their benefits are to be removed following widespread changes announced as part of the 2014 Budget. From April 2015, members at normal retirement age will be able to access their pension fund in full without the need to purchase an annuity. They will be taxed at the marginal tax rate, rather than the 55% rate currently applied. Transitional measures to allow immediate flexibility, primarily by increasing the maximum annual withdrawal cap to 150% and increasing commutation limits, will take effect from 27 March 2014. A wider consultation on the changes was also launched, including proposals to raise the normal retirement age to 57 in 2028. Also announced were wider powers for HMRC to combat pension liberation schemes including the requirement, from 1 September 2014, that any scheme administrator is a "fit and proper person", and that HMRC may de-register a scheme where it appears that the main purpose is not to provide authorised benefits.

For more detail, see Legal update, 2014 Budget: key pensions announcements.

HM Treasury has provided an update on the government's response to the various recommendations of the OTS. These include:

The OTS will publish the results of its current consultation on the competitiveness of the UK tax administration in the summer 2014 (see Legal update, 2013 Autumn Statement: business tax implications: Review of competitiveness of UK tax administration). In particular, the OTS wants to understand the difficulties faced (primarily, though not exclusively, by the SME sector) when preparing and filing taxes and dealing with HMRC.

(See Letter from Exchequer Secretary to OTS: response to partnerships and employee benefits reviews and OTS/HM Treasury, Competitiveness of UK tax administration review.)

The government has confirmed that the measures announced in the Autumn Statement 2013 and subsequently amended and clarified following consultation, including a targeted anti avoidance rule, (see Tax legislation tracker: employment: Review of employment intermediaries), will be contained in the Finance Bill 2014 and will have effect from 6 April 2014. The measures are aimed at reducing the amounts of tax and national insurance contributions lost through false self employment and make employment intermediaries accountable to HMRC for the tax and NICs on remuneration received by workers from deemed employment that is not otherwise subject to PAYE.

(See Overview, paragraph 1.56.)

The government has confirmed that the measures on which it has previously consulted (see Legal update Draft Finance Bill 2014 legislation: key business tax measures: Offshore intermediaries and Tax legislation tracker: employment: Review of employment intermediaries), aimed at ensuring that the correct amounts of tax and national insurance contributions are accounted for by or on behalf of offshore intermediaries that supply workers to employers in the UK, will by contained in the Finance Bill 2014 and will have effect from April 2014.

(See Overview, paragraph 1.55.)

The government has published in the 2014 Budget the amendments that will be made by the Finance Bill 2015 to the calculation of the value on which employees who are have a company car available for private use will be taxed. For cars emitting more than 94 grammes of carbon dioxide per kilometre, the percentage of the list price treated as a benefit will increase by two percentage points per additional 5g up to a maximum of 37 per cent in 2017-18 and 2018-19.

The scale of applicable percentages, which is based on carbon emissions, is set out in section 139 of ITEPA 2003. The Finance Bill 2014 will amend this section and introduce the following rates for 2016-17:

For 2017-18 the differential between the bands will decrease to 3% and for 2018-19 it will be 2%.

The government is also extending the support for zero emission vans by providing incentives through the level of the van benefit charge.

For 2015, the fuel benefit charge multiplier for both cars and vans will increase by RPI and will be determined in September 2014.

(See HM Government: 2014 Budget, paragraphs 2.157 to 2.159 and Overview, paragraphs 1.16, 1.17, 2.13 and 2.14.)

The Finance Bill 2014 will combat the use of artificial dual contracts by non-domiciled employees. However, following consultation there will be some technical changes to the draft legislation.

These proposals were published for consultation in January 2014 (see Legal update, Draft Finance Bill 2014: dual employment contracts and non-domiciles).

Following the consultation, the government has decided:

These changes should target the new rules more closely on dual contracts that are created for tax avoidance rather than commercial purposes.

(See TIIN, Artificial use of dual contracts by non-domiciles and Overview, paragraph 1.61.)

The government has confirmed that the new tax-free childcare scheme, announced in March 2013 (see Legal update, New tax-free childcare scheme announced) and consulted on in the summer 2013 (see Legal update, Consultation on tax-free childcare), will be launched in autumn 2015.

Under the scheme, working families (all parents in the household must be "in work" earning on average £50 a week, although there will be dispensations for certain workers) will be able to claim 20% of qualifying childcare costs for children under 5 (and children with disabilities under 17) from autumn 2015. The new scheme will be available for children under 12 within the first year of the scheme's operation. Claims will be capped at £2,000 per child per year (originally £1,200). If one family member is an additional rate taxpayer, the family will not be eligible to participate.

The new scheme will replace the current employer-supported childcare schemes. Employees registered for employer-supported childcare before the commencement of the new scheme will be able to continue to participate in the employer schemes for as long as the employer offers it, or may switch to the new scheme. Once the new scheme has commenced, employer-supported schemes will be closed to new entrants. A working family will not be able to participate in both an employer-supported scheme and the new scheme. However, the provision of workplace nurseries by employers will not be affected by the introduction of the new scheme and families will be able to benefit from both.

The new scheme will not depend on participation by employers but employers may have some limited involvement if they wish (an information or payment provider role). Further, as the new scheme will not involve any salary sacrifice, the NICs advantages currently enjoyed by employers and employees (see Practice note, Salary sacrifice arrangements: Salary sacrifice and employer-supported childcare) will no longer arise.

(See HM Treasury and HMRC: Tax-Free Childcare, HM Treasury, Tax-Free Childcare: 10 things parents should know, HM Treasury and Prime Minister's Office: Millions of parents to get help with childcare costs, Commons Hansard, Delivering tax-free childcare, HM Treasury: 2014 Budget, paragraph 1.182 and 1.183 and HM Government: Budget 2014: policy costings, pages 56 to 58.)

For all Budget developments relevant to share schemes, see Legal update, 2014 Budget: key share schemes announcements.

The energy-saving and water efficient enhanced capital allowance (ECA) schemes will be updated to include two new technologies:

In addition, the qualifying criteria for a total of 12 current technologies under these ECA schemes will be revised to reflect changes in technical standards. The primary amendment is to the criteria for efficient washing machines, which should allow a slightly wider range of businesses to benefit.

Subject to State aid approval, these changes will come into effect by Treasury Order in summer 2014. Businesses planning to invest these technologies might want to consider delaying investment to benefit from the change.

Under the ECA schemes, a 100% allowance is available to businesses investing in qualifying plant and machinery. For more information on energy-saving and water efficient ECAs, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies.

(See TIIN, Enhanced capital allowances schemes for energy saving and water efficient technologies, HM Treasury: 2014 Budget, paragraph 2.172 and Overview, paragraph 1.76.)

For all environmental Budget developments, see Legal update, 2014 Budget: key environmental announcements.

A consultation document to be published on 27 March 2014 will propose a redesign of the charging mechanism for the bank levy (as to which, see Practice note, Bank levy). The suggestion is that banks be assigned to bands according to their chargeable equity and liabilities (see Practice note, Bank levy: Chargeable equity and liabilities), and charged an amount set for the relevant band.

Any changes made in light of this proposal will be included in the Finance Bill 2014 as it progresses through Parliament and will have effect for chargeable periods beginning on or after 1 January 2015. This would accompany other changes already to be made to the levy following review of its operation (see Tax legislation tracker: finance: Bank levy).

The announcement claims that, among other things, this should increase the predictability of the levy, although it is unclear how this will be the case given that the rate has consistently risen since the levy was introduced (unless it is proposed that any future rises would only affect certain bands, containing the "riskiest" banks, although this might prove controversial given the burden that such entities would face).

(See Overview, paragraph 1.21.)

HMRC has published an updated list of banks that have unconditionally (re)adopted its banking Code of Practice (code). The Finance Bill 2014 will provide for HMRC to publish an annual report on the operation of the code, and the draft legislation for this remains unchanged (or has undergone only "minor technical amendment") since the version published as part of the 2013 Autumn Statement (see Legal updates, 2013 Autumn Statement: business tax implications: Code of Practice for Banks: further revised draft legislation, revised governance protocol and list and Draft Finance Bill 2014 legislation: key business tax measures: Measures reproduced from the Autumn Statement). The list will next be published in the 2015 annual report, which will contain both banks that have (re)adopted the code and, unlike the current list, those that have not.

(See HMRC: Banks that have adopted the banking Code of Practice, HM Treasury: 2014 Budget, paragraph 2.123 and Overview, paragraph 1.77.)

The Finance Bill 2014 will contain legislation:

The legislation will have effect for surrenders taking place on or after 30 March 2014.

Currently:

The government published draft legislation in December 2013 abolishing the Schedule 19 charge (see Legal update, Draft Finance Bill 2014 legislation: key business tax measures: SDRT: abolition on dealings in unit trusts and OEICs). However, following consultation, the government has revised that legislation to limit the in specie exemption to pro rata in specie redemptions and retain an SDRT charge on non pro-rata in specie redemptions. The amended legislation will be included in the Finance Bill 2014. According to the FAQs on the measure, in effect, there will be no Schedule 19 charge but there will be a principal charge on the investor on a non-pro rata in specie redemption. The retention of an SDRT charge (albeit a principal charge rather than a Schedule 19 charge) in these circumstances is fair since the investor is effectively acquiring new interests in chargeable securities.

(See TIIN, Abolition of Stamp Duty Reserve Tax applied to collective investment schemes, Guidance on the abolition of the Schedule 19 stamp duty reserve tax charge, HM Treasury: 2014 Budget, paragraph 2.127 and Overview, paragraph 1.27.)

The government made three announcements:

(See HM Treasury: 2014 Budget, paragraphs 2.112 and 2.114 and Overview, paragraphs 1.32 - 1.34 and 1.77.)

The Finance Bill 2014 will include legislation excluding research and development (R&D) allowances (RDAs) from the loss-buying anti-avoidance rules in Part 14A of the Corporation Tax Act 2010 (Part 14A).

RDAs are available under Part 6 of the Capital Allowances Act 2001 (CAA 2001) for capital expenditure on R&D expenditure by a person carrying on a trade (section 439, CAA 2001). The relief enables a taxpayer to deduct 100% of the expenditure at the end of the chargeable period for which the allowance is made as an expense in calculating its income profits. For further details, see Practice note, Intangible property: tax: Capital expenditure. A person that has not yet started to trade may claim R&D relief as though they were trading, provided that the R&D is related to the intended trade. They are entitled to the relief (at 100%) as if they were carrying on a trade against which the expenditure could have been deducted. For further details, see Practice note, R&D tax reliefs: practical aspects: Not yet started to trade.

Part 14A aims to prevent companies from undertaking tax-motivated reorganisations to access deductions or making arrangements to transfer profits to access those deductions. More specifically, it aims to bring the tax treatment of unrealised losses more closely into line with the longstanding treatment of realised losses by restricting their set-off against other profits. There is an avoidance motive test so that the rules only apply if (one of) the main purpose(s) of the arrangements is to use the deductible amounts. For further details, see Legal update, Finance Bill 2013: targeted corporate loss buying rules.

Absent specific legislation, RDAs would qualify as deductible amounts falling within Part 14A. However, HMRC states that this has had a more significant adverse impact on RDAs than intended. Despite the presence of the motive test, business has expressed uncertainty and concern over the risk of RDAs falling foul of Part 14A if a company carries out preliminary work in the furtherance of R&D and is sold before reaching the point of trading. HMRC considers that this risks undermining capital investment in R&D.

Therefore, the Finance Bill 2014 will amend the definition of "deductible amounts" in Part 14A to exclude expenditure that crystallises as RDAs. This change, which should remove tax risk that may fetter R&D investment, will apply to qualifying changes of ownership (which trigger Part 14A) occurring on or after 1 April 2014.

(See TIIN, Targeted anti-avoidance loss buying rules: exclusion of research and development allowances, HM Treasury: 2014 Budget, paragraph 2.121 and Overview, paragraph 1.22.)

The government will work with industry and the new arm's-length oil and gas regulatory body to ensure that the oil and gas fiscal regime (as to which, see Practice note, Oil and gas taxation) is fit for purpose and remains competitive as the basin matures and extraction becomes increasingly difficult and costly. The government will also ask the new body to consider how best to encourage exploration and reduce decommissioning costs. Any legislation required as a result of these reviews will be in a future Finance Bill.

The Department of Energy and Climate Change is undertaking detailed planning work around establishing the new body to oversee and develop this programme of change. It aims to have the body operating, at least in shadow form, by autumn 2014. (See DECC: Wood sets out £200 billion roadmap for future of offshore oil and gas industry & world's first gas CCS plant planned.)

(See HM Treasury: 2014 Budget, paragraphs 1.114 and 2.134, and Overview, paragraph 2.17.)

The government has confirmed that it will introduce legislation in the Finance Bill 2014 to cap the amount deductible for intra-group leasing payments relating to large offshore oil and gas assets (so-called bareboat charters) and to introduce a new ring fence to protect the resulting revenue. This was originally announced in the Autumn Statement 2013 (see Legal update, 2013 Autumn Statement: business tax implications: Leasing oil and gas assets from offshore associates: anti-avoidance). The cap will be 7.5% of the historical cost of the asset subject to the lease, increased from the 6.5% cap announced in the Autumn Statement and the measure will only apply in relation to drilling rigs and offshore accommodation vessels. These measures will apply from 1 April 2014.

Draft legislation will be published on 1 April 2014 and will be introduced during the passage of Finance Bill 2014. The government will review the impact of these measures after its first year of operation.

(See HM Treasury: 2014 Budget, paragraph 2.138, Overview, paragraph 1.65 and HM Government: Budget 2014: policy costings, page 40.)

The government has confirmed that the Finance Bill 2014 will contain legislation preventing a chargeable gain being subject to corporation tax if an asset is disposed of in the course of oil and gas exploration and appraisal activities and the proceeds are then reinvested in the UK or the UK continental shelf. This legislation will have effect for disposals that occur on or after 1 April 2014.

For the background to the measure (which was announced in the 2013 Autumn Statement) and the December 2013 draft legislation for it, see Legal update, Draft Finance Bill 2014 legislation: key business tax measures: Reinvestment relief for pre-trading companies. Following consultation, the government has revised the legislation to allow proceeds to also be invested in oil assets used in a ring fence trade. The December 2013 draft legislation was stated to apply to disposals occurring on or after the day on which the Finance Bill 2014 received Royal Assent, not on or after 1 April 2014.

(See Overview, paragraph 1.24 and HM Treasury: 2014 Budget, paragraph 2.137.)

The government will consult on a new ultra high pressure/high temperature cluster allowance to replace the existing ultra high pressure/high temperature field allowance (as to which, see Practice note, Oil and gas taxation: Field allowances). The allowance will remove an amount equal to at least 62.5% of qualifying capital expenditure that a company incurs from its adjusted ring fence profits for the purposes of the supplementary charge. Legislation will be introduced in the Finance Bill 2015.

For a general overview of the UK oil and gas tax regime, see Practice note, Oil and gas taxation.

(See Overview, paragraph 2.16 and HM Treasury: 2014 Budget, paragraphs 1.115 and 2.132.)

The Finance Bill 2014 will contain legislation treating the successful planning permission costs of companies involved in mineral extraction (including oil and gas) as expenditure qualifying for capital allowances at 25% per year (100% for oil and gas related expenditure) instead of 10% per year. The measure will apply to expenditure incurred on or after the date that the Finance Bill 2014 receives Royal Assent.

Part 5 of the Capital Allowances Act 2001 (CAA 2001) provides for the relief of certain expenditure on:

The measure extends the scope of qualifying expenditure on mineral exploration and access to include expenditure on seeking planning permission where that planning permission is granted. It responds to representations made as to the different treatment of the costs of successful and unsuccessful applications for planning permission for mineral extraction allowances purposes and should, therefore, be welcomed.

For more information about mineral extraction allowances, see Practice note, Oil and gas taxation: Mineral extraction allowances and Enhanced capital allowances.

(See TIIN, Capital allowances regime: mineral extraction allowance, HM Treasury: 2014 Budget, paragraph 2.115 and Overview, paragraph 1.25.)

The government has confirmed that the Finance Bill 2014 will contain legislation extending the substantial shareholding exemption (SSE) to treat a company as having held a substantial shareholding in a subsidiary being disposed of for the 12-month period before the disposal if that subsidiary is using assets for oil and gas exploration and appraisal activity that have been transferred from other group companies. The legislation will apply to disposals occurring on or after 1 April 2014.

For the background to the measure (announced in the 2013 Autumn Statement) and the December 2013 draft legislation for it, see Legal update, Draft Finance Bill 2014 legislation: key business tax measures: Substantial shareholding exemption to be extended. The December 2013 draft legislation was stated to apply to disposals occurring on or after the day on which the Finance Bill 2014 received Royal Assent, not on or after 1 April 2014.

For more information about the SSE, see Practice note, Substantial shareholding exemption: overview.

(See Overview, paragraph 1.23 and HM Treasury: 2014 Budget, paragraph 2.137.)

The Chancellor has announced that the seed enterprise investment scheme (SEIS), which is designed to encourage individuals to invest in start-up trading companies, is to be made permanent.

Currently, SEIS income tax relief applies to investments in qualifying shares issued on or after 6 April 2012 and before 6 April 2017 up to an annual investment limit of £100,000. CGT reinvestment relief applies to gains accruing in 2013-14 provided an investment in qualifying shares is made in 2013-14. The maximum amount that can be invested is £100,000 and the maximum CGT relief is £50,000. For further details about SEIS, see Practice note, Seed Enterprise Investment Scheme (SEIS).

Legislation will be introduced in the Finance Bill 2014 to remove these time limits. The removal of the income tax relief time limit will take effect from the date that Finance Bill 2014 receives Royal Assent. Extension of CGT re-investment relief will have effect for re-invested gains accruing in 2014-15 and subsequent tax years.

(See TIIN, Making the Seed Enterprise Investment Scheme and the capital gains tax reinvestment relief permanent, HM Treasury: 2014 Budget, paragraph 1.117 and 2.78 and Overview, paragraph 1.31.)

The government will introduce legislation in the Finance Bill 2014 to prevent companies that benefit from Department of Energy and Climate Change renewable obligations certificates or renewable heat incentive subsidies from benefitting from investment under the venture capital trust legislation, enterprise investment scheme (EIS), or seed enterprise investment scheme (SEIS). For further details on the schemes, see Practice notes:

For the purposes of EIS and SEIS, the legislation will take effect for shares issued on or after Royal Assent to the Finance Bill 2014 and, for VCTs, in respect of investments made by a VCT on or after the date of Royal Assent. The government will also consult on broadening the exclusion to prevent other low risk activities that benefit from government subsidies from benefitting from the reliefs.

Additionally, the government will consult on allowing venture capital reliefs to apply to investments made in the form of convertible loans. It appears that a broad consultation exercise in relation to VCTs, EIS and SEIS generally will be carried out in the summer of 2014, with a view to including any legislation required in a future Finance Bill.

(See HM Treasury: 2014 Budget, paragraphs 2.79 - 2.80 and Overview, paragraphs 1.59 and 2.10.)

As announced in the 2013 Autumn Statement, the government has confirmed that it will introduce legislation in the Finance Bill 2014 to restrict relief for an investment in a Venture Capital Trust (VCT) that is linked to a buy-back of other shares held by the investor in that VCT (see Legal update, 2013 Autumn Statement: business tax implications: Venture capital trusts: no relief for investments linked to buy-backs) and to prevent VCTs from using share premium accounts to return capital to investors.

Individuals who invest in a VCT are entitled to claim income tax relief at the rate of 30% on the amount invested, subject to a maximum cap, and to claim relief from tax on chargeable gains on the subsequent disposal of the shares, provided certain conditions are met. For further information, see Practice note, Venture Capital Trusts.

Following concerns that buy-backs of VCT shares followed or preceded by the issue of new shares to the same investor are giving rise to multiple claims for tax relief on (essentially) a single investment, the government intends to introduce legislation in the Finance Bill 2014 to prevent this activity. The new rules, to be inserted into the existing VCT legislation at Part 6 of the Income Tax Act 2007, will reduce the amount of an investment on which income tax relief can be claimed by the amount received by that investor on a "linked" sale of shares in the same VCT (or a predecessor or successor of the VCT). An investment and sale will be linked where one is conditional on the other, or where they occur (in any order) within six months of each other. The provisions will not apply where an investor reinvests amounts received by way of dividend from the VCT. Additionally, the government will introduce legislation to prevent VCTs from using share premium accounts to return capital to investors within three years of the end of the accounting period in which an investment was made. These restrictions will apply by reference to shares issued on or after 6 April 2014.

Similarly, following concerns about VCTs using share premium accounts to return capital to investors, the government intends to introduce legislation in the Finance Bill 2014 to prevent this. Following a consultation exercise with the VCT industry in January 2014, it became clear to HMRC that the use of share premiums to return capital to investors was not widespread and, where it does occur, tends to be within the first years of fund raising. In the light of this, HMRC proposes to introduce a restriction that limits a VCT's ability to return share capital to an investor that does not represent profits made on investments. The restriction will apply for the 3 year period beginning with the end of the accounting period in which funds are raised. The restriction will apply to investments from shares issued on or after 6 April 2014. However, the restriction will not limit the VCT's ability to pay dividends from realised profits and will not apply to funds used to redeem or repurchase shares or to assets distributed in the course of a winding up. If the VCT infringes the new restriction, it will have its approved status withdrawn.

The Finance Bill will also introduce legislation to:

(See TIIN, Venture Capital Trusts, TIIN, Venture capital trusts return of capital, Update on changes to VCTs,HM Treasury: 2014 Budget, paragraph 2.79 and Overview, paragraphs 1.58 and 1.60.)

With effect from 1 April 2014, the tax credit for research and development (R&D) that loss-making small and medium sized enterprises (SMEs) can claim by way of a cash sum from HMRC will increase from 11% to 14.5% of the enhanced R&D expenditure (currently enhanced to 225% of actual qualifying expenditure).

Provisions for claiming the relief, which exists to promote projects that seek an advance in science or technology, are set out in sections 1054 to 1058 of the Corporation Tax Act 2009. An SME is defined as a company or organisation with fewer than 500 employees and either an annual turnover not exceeding 100 million Euros or a balance sheet not exceeding 85 million Euros. For more details on claiming the relief, see Practice note, R&D tax reliefs: practical aspects.

(See HM Treasury: 2014 Budget, paragraph 2.110 , Overview, paragraph 1.29 and HM Government: Budget 2014: policy costings, page 15.)

Legislation will be introduced in the Finance Bill 2014 to include payments that farmers (including farming companies) receive under the new EU Basic Payment Scheme among the list of assets eligible for business asset roll-over relief under sections 152 to 159 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). The measure will have effect for payments received on or after 20 December 2013.

This legislation is necessary to ensure that farmers are entitled to the same relief from CGT for payments received from the new EU agricultural subsidy scheme, since its introduction in December 2013, as they were for payments received under the predecessor Single Payment Scheme, which will cease in 2014.

(See TIIN: Capital gains business asset roll-over relief , HM Treasury: 2014 Budget, paragraph 2.84 and Overview, 1.19.)

The personal allowance for those born after 5 April 1948 will rise from its previously announced level of £10,000 for 2014-15 to £10,500 for 2015-16. At the same time, the basic rate limit will be reduced from £31,865 to £31,785. However, this represents a tax saving for all taxpayers, as the higher rate threshold will increase by 1% in each of those two years.

In relation to the 2014-15 personal allowance and rate limits, the automatic increase in line with the Retail Prices Index (RPI) to September 2014 has already been introduced by secondary legislation (see Legal update, Income tax limit and allowances indexation for 2014-15), but, as in previous years, the Finance Bill 2014 will override those provisions, to bring the level of the allowance to £10,000.

The Finance Bill 2014 will also amend the indexation provisions by substituting the Consumer Price Index as the point of reference in place of RPI for 2015-16 onwards. It will also remove references to individuals born after 5 April 1938 but before 1948 as there will be no separate level of allowance for that group of taxpayers with effect from 2015-16.

(See TIIN: Income tax personal allowance for those born after 5 April 1948 and basic rate limit for 2015-16.)

The government intends to consult on whether and how the income tax personal allowance could be restricted to UK residents and those living overseas who have strong economic connections in the UK (as is the case in a number of countries, including most EU countries). For the current position of non-UK residents in respect of claiming personal allowances, see HMRC's Residence, Domicile and Remittance Basis Manual (RDRM) at RDRM10340 - Residence: Personal Allowances: Non-resident individuals who may claim personal allowances under the provisions of Double Taxation Agreements

(See HM Treasury: 2014 Budget, paragraph 2.67 and Overview, paragraph 2.8.)

The transferable tax allowance for married couples and civil partners will be £1,050 in the tax year 2015-16 (and not £1,000, as announced in the Autumn Statement on 5 December 2013 (see Legal update, 2013 Autumn Statement: private client implications: Lifetime planning: Income tax: marriage transferable tax allowance). From 2016-17, the transferable amount will be 10% of the personal allowance for those born after 5 April 1948.

The transferable tax allowance for married couples and civil partners is available to spouses or civil partners who are not higher or additional rate tax payers. Electing to transfer the transferable amount will result in a corresponding reduction in the personal allowance of the transferor and a reduction in the recipient's income tax liability at the basic rate of tax.

Draft legislation to provide for the transferable allowance was published on 10 December 2013 (see Legal update, Draft Finance Bill 2014 legislation: key private client measures: Lifetime planning: Income tax: transferable tax allowances for married couples).

To follow the progress of this measure, see Private client tax legislation tracker 2013-14: Lifetime planning: Income tax: marriage transferable tax allowance.

(See TIIN, Transferable tax allowances for married couples and civil partners, HM Treasury: 2014 Budget, paragraphs 1.178 and 2.66, HM Government: Budget 2014: policy costings, page 13 and Overview, paragraphs 1.4, Appendix A, A5 and Appendix B, B1.)

The starting rate of income tax for savings income will go down from 10% to 0%, with effect from 6 April 2015. The maximum amount of an individual's savings income that qualifies for the starting rate of income tax will also increase from £2,880 to £5,000 from the same date.

Savings income is taxed as the middle slice of an individual's income (before dividend income, but after other income). The proposed changes will mean that an individual, whose total taxable income is less than the starting rate limit of £15,500 (combining the personal allowance of £10,500 and the new savings starting rate limit of £5,000), will pay no tax on their savings up to the starting rate limit. For individuals who have savings income below £15,500 and no other income, no tax will be payable.

For information on income tax rates and limits generally, see Practice note, Tax rates and limits: Income tax.

(See TIIN, The starting rate of tax for savings, HM Treasury: 2014 Budget, paragraph 2.43, HMRC: The starting rate of tax for savings: Bulletin and FAQs and Overview, paragraph 1.5.)

From 1 July 2014, the individual savings account (ISA) subscription limit will increase to £15,000 for 2014-15. All existing ISAs will automatically become New ISAs (NISAs) on that date. A NISA can hold any mix of cash and shares, and funds can be moved freely between these categories. It will also be possible to have a separate NISA for each category in each tax year, subject to the overall subscription limit. The range of permitted investments for shares NISAs will be widened.

This represents a significant increase in flexibility for savers. The previously announced ISA annual subscription limit for 2014-15 is £11,800, and only half of this amount can be held in cash. These limits will still apply before 1 July 2014, to allow ISA providers time to adapt.

The Junior ISA limit for 2014-15 will increase from £3,840 to £4,000 on 1 July 2014 (as will the Child Trust Fund limit). Individuals aged between 16 and 18 will be able to take out a NISA but it will only be able to hold cash, as is currently the case for ISAs.

The government will implement these changes in secondary legislation amending the Individual Savings Account Regulations 1998 (SI 1998/1870) and the Child Trust Fund Regulations 2004 (SI 2004/1450). For information about the current rules, see Practice note, Tax data: individual savings accounts.

(See TIIN, The New ISA and changes to Junior ISA and the Child Trust Fund: increasing flexibility for savers and investors, HMRC: The New ISA and changes to Junior ISA and the Child Trust Fund: increasing flexibility for savers and investors: Bulletin to ISA managers and FAQs, HM Treasury: 2014 Budget, paragraphs 1.167-1.169 and 2.44-2.48 and Overview, paragraph 1.73 and B9.)

The rate of income tax relief available on the amount of investment by an individual under the social investment tax relief scheme has been confirmed at 30% from 6 April 2014. This rate was favoured by Big Society Capital and will enable eligible social enterprises to receive €344,827 (around £290,000) of tax-advantaged investment over 3 years under the scheme.

Legislation providing a range of income and capital gains tax reliefs to encourage individuals to invest in social enterprises will be included in the Finance Bill 2014. Draft legislation will be published on 27 March 2014. For further detail, see Private client tax legislation tracker 2013-14: Social investment tax relief.

(See HM Treasury: 2014 Budget, paragraph 1.118 and 2.76 and Overview, paragraph 1.11.)

Legislation will be included in the Finance Bill 2014 to correct a defect in the split year rules that were introduced as part of the new statutory residence test by Schedule 45 to the Finance Act 2013. The legislation will ensure that capital gains realised by a remittance basis user in the overseas part of a split year are not charged to UK capital gains tax if remitted to the UK.

For information on the statutory split year rules, see Practice note, Statutory residence test for individuals: Split year treatment.

(See HM Treasury: 2014 Budget, paragraph 2.85 and Overview, paragraph 1.15.)

For all private client and charities Budget developments, see Legal update, 2014 Budget: key private client tax announcements.

The 15% SDLT rate, that currently applies to acquisitions of high-value residential property (HVRP) (£2 million or more) by companies, partnerships with at least one corporate member and collective investment schemes, is extended to residential property acquisitions with a chargeable consideration exceeding £500,000.

The 15% SDLT rate was introduced in the Finance Act 2012 to discourage occupiers from buying through a company or other wrapper (so-called enveloping). This represented part of a package of measures, which also included the annual tax on enveloped dwellings (see Annual tax on enveloped dwellings (ATED) to be extended to dwellings over £500,000). For more information, see Legal update, SDLT legislation: the 15% charge on enveloping high-value residential property.

The Finance Bill 2014 will amend Schedule 4A to the Finance Act 2003 to bring this change into effect. The amended rules will apply to transactions with an effective date on or after 20 March 2014. However, transitional provisions should exclude from the rules most transactions effected under contracts entered into before 20 March 2014 even though completed on or after that date. Where relevant, the transitional rules should be scrutinised to ensure that a transaction effected under a pre-20 March 2014 contract is excluded. NOTE ADDED ON 20 MARCH 2014: For the text of the transitional rules, see Budget Resolutions, page 50 (we will publish a separate legal update about these rules shortly).

(See TIIN, Changes to the taxation of high value UK residential property held by certain non-natural persons, HM Treasury: 2014 Budget, paragraph 2.184 and Overview, paragraph 1.35.)

From 1 April 2015, dwellings valued at over £1 million up to £2 million will be brought within the scope of ATED. Dwellings valued at over £500,000 up to £1 million will fall within the scope of ATED from 1 April 2016.

ATED forms part of a package of measures introduced by the government to dissuade individuals from acquiring (and, therefore, holding) high-value residential property (that is, dwellings valued at over £2 million) in the UK through companies, partnerships with at least one corporate member or collective investment schemes (so-called enveloping). Broadly, the level of the ATED charge depends on which of four property value bands the dwelling falls within (see Practice note, Annual tax on enveloped dwellings (ATED): Annual chargeable amount).

The Finance Bill 2014 will introduce two new ATED bandings:

One of the major flaws in the design of ATED is that large numbers are brought within the scope of the ATED charge (even though those persons carry on genuine commercial activities). This has meant that those that are not meant to be caught by the tax are required to claim one of the many reliefs (see Practice note, Annual tax on enveloped dwellings (ATED): Reliefs). The government has said that it will consult on possible options to simplify the administration of ATED (in particular for property businesses eligible for reliefs), but there is no date for when this will happen.

(See TIIN, Taxation of high value UK residential property held by certain non-natural persons, Overview, paragraph 1.36, HM Government: Budget 2014: policy costings, page 42 and HM Treasury: 2014 Budget, paragraph 1.191 to 1.197.)

The capital gains tax (CGT) charge on disposals of property subject to the annual tax on enveloped dwellings (ATED) will be extended to the two new ATED bands announced in the 2014 Budget (see Annual tax on enveloped dwellings (ATED) to be extended to dwellings over £500,000). In line with the introduction of the new ATED bands, the extension of the CGT charge will be in two stages. Disposals of enveloped properties with a value of over £1 million to £2 million will be subject to CGT from 6 April 2015 and disposals of enveloped properties with a value of over £500,000 to £1 million will be subject to CGT from 6 April 2016. CGT will only be charged on gains accruing on or after those dates. A charge to CGT on disposals of high value residential properties held by companies, certain collective investment schemes and partnerships with a corporate partner was introduced in the Finance Act 2013 as a means of discouraging taxpayers from holding assets within corporate envelopes in order to avoid SDLT. The CGT charge applies to both UK and non-UK resident corporate entities subject to ATED. For more information on the ATED-related CGT, see Practice note, Capital gains tax charge relating to annual tax on enveloped dwellings (ATED).

(See TIIN, Taxation of high value UK residential property held by certain non-natural persons, HM Treasury: 2014 Budget, paragraph 1.192 - 1.195.)

A consultation document on how best to extend capital gains tax (CGT) to disposals of UK residential property by non-UK residents will be published shortly after the 2014 Budget. The extension of CGT to non-UK residents (to be included in the Finance Bill 2015) was first announced in the 2013 Autumn Statement when the publication date for the consultation was scheduled for early 2014. The consultation has been anxiously awaited since then with concerns being raised that there may not be sufficient time to consult on any draft legislation before the measure is introduced in 2015. To follow this measure, see Private client tax legislation tracker 2013-14: CGT: disposal of UK residential property by non-residents.

(See HM Treasury: 2014 Budget, paragraph 2.81.)

Changes to the draft Finance Bill 2014 measures published on 10 December 2013 (see Legal update, Draft Finance Bill 2014: business premises renovation allowances) have been announced. The draft Finance Bill 2014 measures included proposals to:

The government has announced that the following revisions will be included in the Finance Bill 2014:

These changes will take effect for expenditure incurred on or after 1 April 2014 (for corporation tax) and 6 April 2014 (for income tax).

For more information on capital allowances and property, see Practice note, Capital allowances on property transactions.

(See TIIN, Business Premises Renovation Allowances, HM Treasury: 2014 Budget, paragraph 2.111 and Overview, paragraph 1.28.)

The government is to consult in summer 2014 on options to improve the operation of the construction industry scheme (CIS) (see Practice note, Construction Industry Scheme (CIS)) for smaller businesses and to introduce mandatory online filing for contractors. The government will also discuss with industry revisions to reporting obligations and improvements in registration for joint ventures. However, no further details are known at present.

(See HM Treasury: 2014 Budget, paragraph 2.215.)

As part of its investment management strategy (see Legal update, UK investment management strategy launched), the government will consult on the introduction of an SDLT relief for the seeding of property authorised investment funds and, in addition, the SDLT treatment applicable to co-ownership authorised contractual schemes (as to which, see Practice note, Authorised contractual schemes: tax).

A seeding relief will provide relief from SDLT where property is transferred from one vehicle to another without any real change in the underlying ownership, thereby providing property investors with greater flexibility in their investment structuring. Given the withdrawal of unit trust seeding relief some years ago because of its abuse, HMRC will want to be sure that this does not happen again.

It is to be hoped that the consultation will conclude that transfers of units in co-ownership authorised contractual schemes do not attract SDLT, thereby providing equivalent treatment to transfers in overseas property unit trusts.

(See HM Treasury: 2014 Budget, paragraph 2.185 and Overview, paragraph 2.19.)

For all Budget developments relevant to property, see Legal update, 2014 Budget: property implications.

For all Budget developments relevant to construction, see Legal update, 2014 Budget: construction industry implications.

Secondary legislation (to be published) will be introduced to increase the VAT registration limit in line with inflation for both taxable supplies and for acquisitions from other member states from £79,000 to £81,000 with effect from 1 April 2014.

The VAT deregistration limits will also increase to:

The revised deregistration limits also take effect from 1 April 2014.

For general information about VAT registration and deregistration, see Practice note, Value added tax: Taxable persons and VAT registration. For information about intra-Community acquisitions, see Practice note, Cross-border transactions and VAT: UK inbound supply of goods.

(See HM Treasury: 2014 Budget, paragraph 2.175 and Overview, paragraph 1.72.)

NOTE ADDED ON 20 MARCH 2014: The The Value Added Tax (Increase of Registration Limits) Order 2014 (SI 2014/703) was made on 18 March 2014.

The Finance Bill 2014 will amend the UK VAT legislation on prompt payment discounts (PDDs) so that it is clearly aligned with EU legislation with effect from 1 April 2015. The measure will ensure that VAT is accounted for on the actual price paid for goods and services where PPDs are offered. In addition, a Provisional Collection of Taxes Act 1968 resolution will give statutory effect to the measure from 1 May 2014 for supplies of telecommunications and television and radio broadcasting services where there is no obligation to provide a tax invoice, to protect revenue in advance of the main change.

The measure is intended to protect tax revenue by aligning UK VAT law on PPDs with EU VAT law. Until now, HMRC has interpreted UK legislation to allow suppliers to account for VAT on the discounted price offered for prompt payment even when that discount is not taken up, resulting in lost tax revenue. In particular, HMRC has identified several instances of suppliers of business to consumer services offering PPDs in the telecommunication and broadcasting sectors.

The change will come into effect on 1 May 2014 for supplies of telecommunication and broadcasting services to consumers and 1 April 2015 for other goods and services, unless, for revenue protection purposes, it is necessary to bring forward the implementation date for specified supplies.

The government will consult on implementation prior to the 1 April 2015 coming into force.

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

(See TIIN, VAT: prompt payment discounts, HM Treasury: 2014 Budget, paragraph 2.176 and paragraph 2.176, and Overview paragraph 1.44 .)

The government plans to introduce a reverse charge on supplies of gas and electricity to prevent missing trader intra-community (MTIC) fraud in relation to those commodities. The change will be introduced through secondary legislation and the government will discuss the timing of introduction with the relevant industry bodies.

This measure will alter the VAT treatment of gas and electricity to make the customer liable to account for the VAT. It does not apply to domestic supplies or to businesses that are not registered or liable to be registered for VAT.

Informal consultation between HMRC, HM Treasury and the main trade bodies has been ongoing for over two years. The government will further (informally) consult on the timing with those affected, with a view to laying the necessary secondary legislation at the earliest opportunity thereafter. Under EU law member states can introduce a reverse charge in relation to those supplies that the EU has identified as being at risk of fraud, including wholesale gas and electricity.

For background on MTIC, see Practice note: overview, Cross-border transactions and VAT: missing trader fraud (MTIC). For information on VAT generally, see Practice note, Value added tax.

(See TIIN: VAT: reverse charge for gas and electricity, HM Treasury: 2014 Budget, paragraph 2.177 and Overview, paragraph 2.33.)

(See Overview, paragraph 1.77.)