Our view – both good and bad
The Treasury has published draft provisions for Finance Bill 2018-19. This was first published for consultation on 6 July 2018. This publication of draft legislation ahead of its introduction to Parliament is part of the government’s tax policy making process, which was updated last December.
The draft legislation runs to some 222 pages, including 40 draft clauses and 8 detailed Schedules. As well as the draft legislation there has also been published 141 pages of explanatory notes!
In my mind, the jury is still out as to whether this early publication is good news or not. The good news is that there aren’t many headline surprises, as most of what’s in it has already been trailed either in the Autumn 2017 Budget or the 2018 Spring Statement. The bad news is that the draft rules are open for technical consultation until 31 August. More good news – few of the draft rules have immediate or retrospective effect with those that do mainly correcting original legislation so that it operates as it was intended. Bad news – it makes tax planning hard as genuine commercial transactions may be delayed pending certainty as to how the new rules will apply.
The main provisions concern the EU’s reporting requirements for cross-border tax planning, countering profit fragmentation, bringing non-residents’ gains on disposal of UK real property within the scope of CGT, and making changes to the penalty regime.
For me, the key change which is likely to affect many readers of this is changes to Entrepreneurs’ Relief where a shareholding is diluted below the 5% threshold (for shares not acquired through the EMI share option scheme route). The new measure will allow individuals whose shareholding is diluted below 5% as a result of new share issues (eg on a funding round) to obtain relief for gains up to that time. The measure will take effect for shares held at the time of fundraising events which take place on or after 6 April 2019. Two elections will be required and I will comment on these in more detail nearer to the date when the rules kick in.