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L-Day 2021: draft legislation for consultation, but more to come


Published: 21 Jul 2021 Update History

Draft legislation, consultation updates and promises of future tax measures were made on 20 July. The focus for many will be on basis period reform, but ICAEW's Tax Faculty highlights the other key announcements.

In addition to previously announced measures, the draft legislation to be included in Finance Bill 2021-22 includes two new measures: basis period reform and the location of risk regulation for insurance premium tax.

The government has also announced three policies that it will legislate in the autumn:

  • A capital gains tax (CGT) exemption for London Capital & Finance compensation payments. Compensation in the form of a subscription to an ISA to return the money to an ISA will not contribute to the annual ISA subscription limit.
  • An income tax exemption for the Child Winter Heating Assistance and the Short-Term Assistance social security payments in Scotland.
  • An income tax exemption for local authority COVID grant scheme payments, including the COVID Winter Grant Scheme and COVID Local Grant Scheme, and similar schemes operated by the devolved administrations.

Draft legislation for consultation

Income tax

Alongside basis period reform , there was draft legislation released relating to pensions.

It is confirmed that the normal minimum pension age at which pension benefits can be taken without incurring an unauthorised payment charge will increase from 55 to 57 from April 2028. The draft legislation includes various protection measures in response to a previous consultation

Where a pension scheme annual allowance charge of at least £2,000 arises, the scheme member can request that the liability is met from their pension fund under the “scheme pays” rule. The deadline for doing this is currently 31 July in the year following the end of the tax year. However, where an annual allowance charge is triggered retrospectively, because of retrospective amendment to their pension input amount (as could be the case with the government’s planned remedy for addressing the age discrimination found in the 2015 public service pension reforms), the taxpayer may be out of time to request that the scheme meets their liability.

To address circumstances where a scheme member is informed of a retrospective change to their pension inputs by the scheme administrator, draft legislation extends the deadline to the earlier of three months following the date that the scheme administrator provides that information and six years following the end of the tax year in question.   

Corporation tax

HMRC published a summary of responses to the second consultation on its proposals for the notification by large businesses of uncertain tax treatments, alongside draft legislation for comments. The draft legislation reflects a number of changes compared to the proposals consulted on earlier this year. In particular:

  • The number of triggers which would cause a tax treatment to be considered “uncertain” has been reduced from seven to three. These triggers, in relation to an arrangement or transaction entered into by a business, will be:
    o the business is taking a tax interpretation that is different from HMRC’s known position (formerly trigger A); or
    o a provision has been recognised in the accounts of the business to reflect the fact that additional tax may be payable due to legal interpretation uncertainty (formerly trigger E); or
    o there is a substantial possibility that a court of tribunal would find the treatment adopted by the business to be incorrect (a new trigger).
  • Uncertain treatments relating to transfer pricing matters will be excluded from the regime except where either of triggers A or E above arises.
  • Allowance has been made for increased penalties where the business repeatedly fails to notify uncertain tax treatments.

Notification will be required at the same date as the relevant tax return is due and will apply to returns required to be made on or after 1 April 2022. This means that the regime will apply to some transactions and arrangements that have already taken place.

HMRC will issue draft guidance in the coming weeks on how it will operate the regime and what businesses will need to do to comply with it. This will include details of how to apply the £5m tax materiality threshold for notification which was retained from the proposals published earlier this year.

In addition, the following draft clauses and documents were published:

Insurance premium tax

Draft legislation has been published to move the criteria for determining the location of a risk for insurance premium tax into primary legislation.

Tackling avoidance

HMRC published a summary of responses to its proposals made earlier this year for measures to clamp down on promoters of tax avoidance. Four new measures are being introduced as follows:

  • A new power for HMRC to seek freezing orders that would prevent promoters from dissipating or hiding their assets before paying the penalties that are charged as a result of breaching anti-avoidance obligations.
  • New rules that would enable HMRC to make a UK entity that facilitates the promotion of tax avoidance by offshore promoters subject to a significant additional penalty.
  • A new power to enable HMRC to present winding-up petitions to the courts for companies operating against the public interest.
  • New legislation that would enable HMRC to name promoters, details of the way they promote tax avoidance and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to get out of avoidance arrangements.

Read more:


The draft Finance Bill  clauses also includes two previously announced measures to tackle electronic sales suppression and tobacco duty evasion, both of which will apply from Royal Assent of Finance Bill 2021-22.

Other draft legislation

The legislation for the plastic packaging tax was included in Finance Act 2021 and will apply from April 2022. Two draft statutory instruments to amend the legislation have now been released for consultation: 

  • The Plastic Packaging Tax (Descriptions of Products) Regulations 2021, which remove three categories of products from the meaning of a plastic packaging component and add a further category of products.
  • The Plastic Packaging Tax (General [Substantial modification]) Regulations 2021, which set out the meaning of “substantial modification” in respect of the tax. 

Updates on other consultations

Following the publication of summaries of responses to several consultations, the government will continue to engage with stakeholders on:

As announced on 23 March, the government will not be taking forward any changes to VAT grouping but has now published a summary of the responses to the call for evidence on VAT grouping establishment, eligibility and registration.

What is missing?

It is common that the legislation released for consultation on L-Day does not cover all measures eventually included in the Finance Bill.

The Budget 2021: Overview of tax legislation and rates had flagged that Finance Bill 2021-22  would include landfill tax rates for 2022 to 2023 and also the outcome of a review of the surcharge on banking companies. An announcement on the latter is expected in the autumn.

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