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The shifting sands of tax law in 2017: don’t get stuck!

You may recall that when the snap general election was announced, the now Spring Finance Act 2017 was significantly shortened. Over half of the drafted Bill was chopped (from 400 to 150 pages) as there was insufficient time to adequately debate the proposed announcements.

In the past few weeks HM Treasury has confirmed that previously dropped changes to tax rules will now re-appear in the Autumn Finance Bill 2017.

So why does this change matter?

HM Treasury’s intention is that all the re-introduced provisions will be effective from the same application dates as originally accounted in the spring – that is, retrospective measures will apply. So for Corporation tax related changes, the effective date will be 1 April 2017 (there are some provisions that have different dates e.g. remote gaming duty, oil field taxation and the FYA for electrical charging points). Similarly for income tax, pensions etc. the effective date will be 6 April 2017.

That means that not all the rules affecting your tax liability at this moment in time are yet enshrined in law; instead a mixture of statute and assumptions exists.

HM Treasury has confirmed the changes that were originally announced are to be enacted as soon as possible after the summer recess, with no policy amendment. Given the current state of political affairs we cannot be certain this will be the case or whether there will be any significant changes to the draft legislation during the process of the Bill through the readings and committees. However, the prudent approach would be to assume that all dropped pieces of legislation will be ‘restored’ unchanged and applicable from April 2017.

So how might this affect my company?

If a company has a year end after 1 April 2017, part of that year could be affected by the provisions due to be re-introduced. For most this will not be a problem, as by the time Corporation tax becomes due and the return needs to be filed with HMRC the Bill should have become enacted and tax liabilities can be calculated and confirmed.

It is those companies paying Corporation tax via Quarterly Instalment Payments (QIPS) that will most likely have to deal with this uncertainty when preparing provision computations, calculating the potential annual corporation tax liability. Companies cannot be certain what adjustments may be required or whether the proposed draft legislation will change from when it was first published a few weeks back. You may need to tread carefully.

Some of these re-introduced provisions could have a significant impact on companies’ tax liabilities. For example, two of most significant changes are:

  • The restriction of interest as a deductible expense for certain companies (dependent upon group size and the amount of interest payable)

  • The new loss relief rules, which will see losses generated after (1 April 2017) being available for group loss relief, not just in the year they arise, but for future years as well - and not limited to the same trade

Also, software providers will not be able to update their software packages until after the Autumn Bill becomes law, so there are potential IT issues for companies calculating their tax liabilities and submitting their returns. HMRC have already indicated that you should wait to submit your return until they have got their gateway in order.

However, if your company has a vital need to file a Corporation tax return for a period ending after 1 April 2017 (or to make a tax payment) within the next few months, do speak to a tax adviser sooner rather than later about the next steps. Otherwise you may run the risk of having to make considerable adjustments later in the year.

Any impact on me personally?

For the majority of individuals, their personal tax returns for the 2017-18 tax year and any tax due under self-assessment will be due after the Autumn Bill has become law.

However, if an individual is leaving the country and is required to determine and pay all taxes due before the Bill comes into law, there will be provisions to be considered that are not yet law but are due to become law.

Again, we suggest you speak to your tax adviser if you are unsure or have any questions.

Looking forward…..

In the absence of clear signposts, we shall just have to wait to see what the shifting tax sands (and the next political agenda) bring us next.

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