Experts hail 'grown up' approach to finance bill
Tax profession welcomes early chance to probe finance three months before it becomes law
PUBLICATION Publication of the draft finance bill three months before the tax changes become law, is a “grown up” approach that will help create a more stable tax system, according to tax experts.
The publication yesterday by the Treasury of the 500-page finance bill for 2011 will give tax experts three months to scrutinise the legislation and prepare for new tax rules.
Previously, the chancellor made tax policy announcements at both an autumn Pre-Budget Report and a spring Budget, but legislation was not generally published until after the spring Budget, leaving only a few months before it had to be finalised.
The Pre-Budget Report has now been abolished but the publication of the draft legislation has been brought forward to three months ahead of the introduction of the finance bill.
The finance bill includes reforms to the corporate tax system and the pensions framework, and additional complex anti-avoidance measures.
Stephen Herring, senior tax partner, at BDO, said: “This is tantamount to an early draft of the finance bill and, predictably, amounts to something of a mixed bag. The sheer volume of proposals issued today demonstrates the challenges faced by the Chancellor in his ambition to radically simplify the UK’s tax system but clarity of legislation cannot merely be measured by the number of pages of the finance bill.”
Baker Tilly welcomed the extended consultation on tax changes, but said that the government needed to feedback during the consultation to show that “that the new approach has substance and is not a mere box ticking exercise”.
The finance bill extends the favourable UK tax treatment for furnished holiday to the EEA region (the European Union, Iceland, Norway and Liechtenstein), rather than just the UK.
However, the criteria for receiving the “loss set-off” tax rules have been tightened.
With effect from April 2012, properties must now be available for letting for a period of 210 days, compared to 140 days currently. In addition, the properties must be let for a period of 105 days, rather than 70 days currently. Property owners will have a two-year period of grace to meet the 105 day requirement.
As promised by the chancellor in his June 2010 Emergency Budget, draft legislation has been released that restricts pension tax relief for individuals. This reduces the annual allowance from £255,000 to £50,000 from 6 April 2011and the lifetime allowance from £1.8 million to £1.5 million from 2012.