Finance Bill 2020 – Report stage amendments

29 June: The government has tabled a further series of amendments to the Finance Bill 2020 ahead of its report stage this week. ICAEW’s Tax Faculty provides a summary of the changes and urges further amendments to the clause modifying the statutory residence test in light of COVID-19.

The Finance Bill completed its tenth, and last, Bill Committee stage on 18 June 2020. In that final committee meeting, the clause and Schedule adding the extension of the off-payroll working rules to the private sector were agreed to. The Bill as amended in Committee was published on 19 June 2020.

The report stage of the Finance Bill is scheduled to take place over two days from 1 July and the government has tabled a further series of amendments, covering:

Taxation of coronavirus support payments (New clause 19)

This new clause introduces a new Schedule into the Bill and provides for definitions of the various coronavirus related support schemes to which it applies (including the Coronavirus Job Retention Scheme and the Self-Employed Income Support Scheme). It also allows for secondary legislation to specify further schemes to which the Schedule will apply, as well as to modify the effect of the Schedule in relation to particular scheme.

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Protected pension age of members re-employed as a result of coronavirus (New clause 20)

In certain circumstances, people who are a member of a pension scheme may have a protected pension age under that scheme which entitles them to receive pension benefits at an age below the normal minimum pension age, but which can be lost if they are re-employed. This new clause prevents that happening where the only or main reason that the member was returned to work was to help the employer respond to the public health, social, economic or other effects of coronavirus.

Modifications of the statutory residence test in connection with coronavirus (New clause 21)

This new clause modifies the statutory residence test in Schedule 45 to the Finance Act 2013 so that the presence of certain individuals in the UK for purposes connected with coronavirus is discounted for the purposes of determining whether they are resident in the UK in the tax years 2019/20 and 2020/21. It was originally announced in a letter to the head of the Treasury Select Committee on 9 April.

In principle, this clause is welcome so as to prevent people becoming UK resident as a result of the coronavirus lockdown, but the Tax Faculty argues that the amendments do not go far enough to remove the issue that employees who were non-resident under the third automatic overseas test will become resident if they are stuck in the UK and work for more than 30 days here. Equally if they cannot work overseas then they will also fail the test because they will have a significant break from overseas work.

Being taxable on the work they perform in the UK is reasonable, but becoming taxable on worldwide income while they may remain resident in the overseas country they were working in and hope to return to is not. This will greatly increase their compliance costs as they may need to deal with the interaction of the UK and the overseas tax regime on worldwide income. In the Tax Faculty’s view, this new clause should be amended to relax the 30 workday and significant break conditions.

Future Fund: EIS and SEIS relief (New clause 22)

This new clause prevents Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) relief from being withdrawn or reduced for the purposes of income tax and capital gains tax in cases where an individual enters into a convertible loan agreement under the Future Fund with a company and subsequently receives value from the company under the agreement.

The Future Fund is a scheme operated by the British Business Bank plc on behalf of the government which will issue convertible loans between £125,000 to £5m to innovative companies which are facing financing difficulties due to the coronavirus outbreak.

Interest on unpaid tax in case of disaster etc of national significance (New clause 23)

This new clause amends s135, Finance Act 2008 to enable HM Treasury to specify in an order which payments of tax and other liabilities that are deferred by agreement during a period of national disaster or emergency will not attract interest or surcharges. This is to allow for the deferral of VAT payments to be free from interest and surcharges.

Exceptional circumstances preventing disposal of interest in three year period (New clause 24)

Following a written ministerial statement on 3 June, this new clause amends the stamp duty land tax provisions in Sch 4ZA, Finance Act 2003 to provide that, where a person purchases a dwelling intending it to be their only or main residence, the three-year period within which a major interest in the previous dwelling must be disposed of to be able to obtain a refund of the higher rate SDLT may be extended to a longer period if, because of exceptional circumstances, the interest was not disposed of in that three-year period.

HGV road user levy (New clause 25)

This new clause provides that HGV road user levy is not chargeable in respect of the period of 12 months beginning with 1 August 2020. It provides that where the levy has been paid in respect of a non-UK heavy goods vehicle in respect of the exempt period, a rebate can be claimed.

Enterprise management incentives (EMI): disqualifying events (New clause 32)

This new clause provides that a disqualifying event for the purposes of relief under the EMI scheme does not occur in relation to an individual in relation to incentives as a result of the individual taking leave, being furloughed or working reduced hours because of coronavirus disease. This fills in the blank on the treatment of EMI schemes from HMRC’s employment-related securities bulletin issued on 8 June.