Finance Bill 2019’s early draft welcomed, with reservations

A key criticism of public sector IR35 legislation – that it was passed without enough time for proper scrutiny – seems to have been headed off from being levied at other areas of tax.

Some of these new areas potentially affect contractors, such as an extension of offshore time limits for tax assessments; penalty changes on late returns and Entrepreneurs’ Relief tweaks.

These are just three of about 40 measures whose draft clauses, explanatory notes and impact notes have now been published, ahead of their April 2019 start, subject to Budget 2018.

The publication is notably earlier than previous years, so will ‘allow more time to review and appraise the proposals,’ to help ensure the rules are ‘fit for purpose,’ says Blick Rothenberg.

'Rushed consultations'

The tax advisory firm adds that, in the past, “consultations were being rushed,” with the effect that legislation would hit in just “a matter of weeks” before the new tax year’s start.

With public sector IR35 changes for example, the government ignored the many recommendations to omit clauses in the-then finance bill, meaning proper scrutiny could not be applied.

Ministers were still even tweaking the legislation once it had already been introduced (‘public authority’ was redrafted), and only published the ‘TIIN’ four months in advance.

'Quacks like a TIIN'

But the Tax Information and Impact Notes for all the new measures were unveiled last week, ahead of their commencement in nine months’ time. Or at least they were in all but name.

“On the webpage of each individual proposed piece of new legislation the first item is an HTML document which is described as a policy paper. But it is really a TIIN,” says the ICAEW.

“There are only a limited number of descriptions you can use on .gov.uk and government departments aren’t allowed to use other ones. A TIIN doesn’t exist as far as .gov.uk is concerned. But if it looks like a TIIN and it quacks like a TIIN, it is a TIIN.”

'Jumping the gun'

The bigger problem, says the Institute of Chartered Accountants in England and Wales (ICAEW), is that the ministers may still be “jumping the gun,” despite unveiling the clauses early.

“[For example] there was a call for evidence earlier this year on the way rent a room relief is currently working,” the institute said.

“[We] made representations and we took part in a round table with officials to consider whether the relief was operating as intended. That sounds to us [like] pre-stage 1 of the consultation framework. Publishing draft legislation is very definitely stage 3.”

'Starting point'

But Blick Rothenberg believes the government is heading in the right direction, since the new approach to introducing tax rules came after the revised timetable for the annual Budget, adopted by chancellor Philip Hammond.

The firm’s tax partner Nimesh Shah said: “We naturally expect that the draft Finance Bill 2019 will be added to later in the year -- around the time of the Budget, including announcing the new tax rates for the 2019/20 tax year, so this is by no means a complete bill but provides an earlier starting point to the introduction and eventual effect of the rules.”

Unveiling the draft measures and their supporting materials, Mel Stride, financial secretary to the Treasury said: “Britain is one of the best places in the world to do business, and we’re determined to see that continue.

“This legislation illustrates our commitment to creating an environment in which innovation and enterprise can thrive, while ensuring that everyone plays by the same rules.”

'Greater certainty'

He added: “As part of the government’s new single fiscal event timetable, earlier publication of Finance Bill legislation allows more time for scrutiny of tax measures, giving greater certainty and stability to taxpayers.”

The draft clauses are open for responses by August 31st ahead of them being republished as part of Finance Bill 2018/19 shortly after Budget 2018, which is expected to be in November.

When passed, the bill will become the Finance Act 2019 but in the meantime, the 222-page Finance Bill is available, alongside 142 pages of Explanatory Notes.