Thursday 11 July 2019
Finance Bill 2019-20
The Government have consulted on a number of tax policies announced at Budget 2018. Today, the Government are publishing responses to these consultations alongside draft legislation to be included in the Finance Bill 2019-20. This is in line with the Government’s commitment to publish the majority of tax legislation in draft before it is introduced to Parliament.
Policy decisions in response to consultation
In response to consultation, the Government have made a number of policy decisions which are reflected in the draft legislation, relating to:
Off-payroll working rules from April 2020—the Government have previously announced that they will improve compliance with the off-payroll working rules in all sectors by bringing them into line with the public sector from April 2020. The reform will make organisations responsible for determining whether the existing rules apply to the contractors they hire and ensuring the necessary employment taxes are paid. As announced at Budget 2018, outside the public sector, this change will only apply to medium and large-sized organisations. The draft legislation makes clear when non-public sector organisations, including unincorporated organisations, will be considered to be small and therefore not within the scope of the reform. The draft legislation also includes provisions to ensure that all parties in the labour supply chain are aware of the organisation’s decision and the reasons for that decision, and will introduce a statutory, client-led status disagreement process to allow individuals and fee-payers to challenge the organisation’s determinations.
Digital services tax—the Government have previously announced a tax on the UK-linked revenues of certain digital services to ensure that large multi-national businesses pay their fair share towards the public services we all rely on. Following consultation, the Government have made changes to the detailed design to better ensure the legislation delivers on its objectives. The treatment of cross-border marketplace transactions will be changed in cases where a transaction involves a non-UK user located in a country that levies a DST on similar transactions. There will be various changes to the administrative framework. The DST will now be payable annually rather than in quarterly instalments, and it will be assessed on a group-wide basis. An exemption for financial and payment services from the definition of an online marketplace will also be included.
Corporate capital loss restriction—the Government are introducing a new corporate capital loss restriction that will restrict the use of carried-forward capital losses to 50% of the amount of annual capital gains from April 2020. The draft legislation maintains the fundamental design features that were set out at consultation such as the commencement date and the amount of annual deductions allowance. The exemption for the policyholder share of basic life assurance and general annuity business (BLAGAB) gains and losses has been extended to cover all BLAGAB losses that offset BLAGAB gains, and some clarifications have been made to ensure that the regime operates as intended. The Government will also provide exemptions for gains within the oil and gas ring-fence and the REIT property rental business ring-fence. Further provisions have been made in respect of one day accounting periods, connected party losses and loss streaming rules.
Stamp taxes on shares consideration rules—The Finance Act 2019 introduced a targeted market value rule to prevent contrived arrangements involving transfers of listed securities to connected companies to minimise stamp taxes on shares liability. Following consultation, the Government are extending the market value rule to the transfer of unlisted shares to a connected company. The draft legislation also removes an anomaly where a double-charge can arise on certain company re-organisations.
Technical tax changes
In addition, the Government are publishing a small number of technical tax changes that need to be made to ensure legislation works as intended. These include measures relating to:
Capital gains tax: Relief for loans to traders—extending the scope of the capital gains tax relief in respect of loans to traders, so that it applies to loans made to traders located anywhere in the world and not just the United Kingdom.
Share loss relief—extending the scope of the income tax and corporation tax share loss relief, so that it applies to shares in companies carrying on a business anywhere in the world, and not just the United Kingdom.
Legislation with immediate or retrospective effect
The Government have published legislation for the following measures that will have immediate or retrospective effect:
Deferred corporation tax payments on cross border transfers—this legislation will allow companies to defer payment of tax that arises on certain transactions with group companies in the European economic area. This is intended to provide certainty for UK business following a recent first-tier tax tribunal decision. The legislation will apply to corporation tax that becomes payable for accounting periods that end on or after 10 October 2018.
Scope clarification: lease accounting standards—minor amendments to clarify the scope of legislation on changes to lease accounting standards introduced in Finance Act 2019.
Previously announced policy changes
The Government are also publishing legislation for the following policy changes announced earlier this year:
Windrush compensation scheme—payments will not be subject to income tax, capital gains tax or inheritance tax when made under the Windrush compensation scheme.
The Government previously consulted on proposals and subsequently draft legislation last year to reform penalty regimes for late filing and late payment across taxes. The Government remain committed to these reforms. The timing and details of implementation will be announced at a future fiscal event.
As announced at Budget 2018, to tackle the hidden economy, the Government are considering a tax registration check linked to renewal processes for some public sector licences. This is known as “conditionality”. The timing of any change will be announced at a future fiscal event.
For other consultations, the Government are continuing to consider the responses and will respond in due course.
Draft legislation is accompanied by a tax information and impact note (TIIN), an explanatory note (EN) and, where applicable, a summary of responses to consultation document. All publications can be found on the gov.uk website. The Government’s tax consultation tracker has also been updated.
Environment, Food and Rural Affairs
Agriculture and Fisheries Council
Agriculture and Fisheries Council takes place in Brussels on 15 July.
As the provisional agenda stands, the Finnish presidency will start with a presentation of their work programme for the coming six months.
The main item for agriculture will be on the post-2020 common agricultural policy (CAP) reform package, which covers three regulations: the regulation on CAP strategic plans; the regulation on financing, management and monitoring of the CAP and the regulation on the common market organisation (CMO) of agricultural products. Member states will exchange views on the environmental and climate-related aspects of the reform package.
The Commission will also present the report from the high-level group on the sugar market.
There are currently four items scheduled under “any other business” where the Commission will update the Council about;
the state of play on African swine fever;
animal welfare during transport in high temperatures during summer months;
the progress report on the implementation plan to increase the availability of low-risk plant protection products and accelerate implementation of integrated pest management in member states; and
the outcome of the third African Union-European Union agriculture ministerial conference (Rome, 21 June 2019).
Foreign and Commonwealth Office
Foreign Affairs Council
The Minister for the Middle East, my right hon. Friend the Member for South West Wiltshire (Dr Murrison), will attend the Foreign Affairs Council (FAC) on 15 July. It will be chaired by the High Representative of the European Union (EU) for Foreign Affairs and Security Policy (HRVP), Federica Mogherini, and will take place in Brussels.
The FAC will discuss current affairs, Iraq, Iran and the Central African Republic. There will also be an informal lunch with the Moldovan Foreign Minister Nicolae Popescu.
HRVP Mogherini will provide an update on the current situation in Sudan and progress in African Union (AU) and Ethiopian mediation efforts towards a civilian-led Government. The HRVP will also debrief Ministers on Ukraine and the outcomes of the 8 July EU-Ukraine summit. We expect HRVP Mogherini to raise recent developments in Venezuela, as well as the Sahel following her recent visit.
Ministers will discuss how to respond to Iran’s breach of the joint comprehensive plan of action (JCPoA). The UK is committed to the JCPoA, and are clear that the deal is critical to shared security interests. We anticipate that Ministers will also discuss INSTEX (an instrument to support legitimate trade with Iran) and its operations. Following recent tensions in the region, the UK will call for de-escalation and dialogue to reduce the risk of miscalculation.
Ministers will focus on the need for EU member states to work together to re-energise the reform agenda in Iraq. Security and economic reforms were major themes during the recent UK visit by the Iraqi President Barham Salih. The UK will reiterate the urgent need to address the underlying issues that gave rise to Daesh.
Central African Republic
Ministers will discuss the political situation in the Central African Republic (CAR), with a likely focus on EU security sector support. The 6 February AU-led political agreement for peace and reconciliation in CAR (APPR) has improved prospects for peace, security and stability.
Lunch with the Moldovan Foreign Minister
Ministers will welcome the formation of the coalition Government and the peaceful transition of power in Moldova. The Government have announced a reformist agenda to tackle corruption, improve the rule of law and increase democratic accountability. Ministers will welcome this and encourage Moldova to undertake concrete measures to meet their commitments under the 2014 association agreement as the basis for the resumption of EU financial and budgetary support.
The Council is expected to adopt conclusions on Iraq and the EU’s priorities for the United Nations General Assembly (UNGA).
Windrush Lessons Learned Review
The terms of reference for the Windrush lessons learned review set out that the aim was to publish the report by 31 March 2019.
On 8 July 2019, the independent adviser to the Windrush lessons learned review, Wendy Williams, wrote to me about the timing of her review. The complexity and scale of the work required, and the request for her to also consider the right-to-rent scheme following the High Court judgement of 1 March, means that she now expects to submit her final report to me at the beginning of September. I will publish the report as soon as practicable following this.
We are determined to learn from, and right the wrongs of, the past. I look forward to receiving the report when the review concludes. I will consider the recommendations from the review carefully and announce appropriate action.
I will place a copy of Wendy Williams’s letter of 8 July in the Libraries of both Houses.
Anthony Grainger Inquiry Report
Today the Anthony Grainger public inquiry has published its final report, which has been laid before the House.
Anthony Grainger was shot dead on 3 March 2012 by an armed firearms officer of Greater Manchester police as part of the covert investigation named Operation Shire. A public inquiry was announced by the then Home Secretary in March 2016 to ascertain the circumstances surrounding Mr Grainger’s death.
I would like to thank His Honour Judge Teague for publishing his report today and for leading this important work, from which we expect to learn valuable lessons for the future. The Government will provide a formal response in due course, once we have fully considered the report, and any recommendations therein.
The report will be available from the Vote Office and to view on the inquiry website https://www.graingerinquiry. org.uk/ and on gov.uk.
High Speed Rail (West Midlands – Crewe) Bill: EVEL
I am today placing in the Library of the House the Department’s analysis on the application of Standing Order 83L in respect of the amendments made in the Commons Select Committee stage for the High Speed Rail (West Midlands - Crewe) Bill.
Clean Maritime Plan
I am today announcing the publication of the clean maritime plan, the UK’s route map to clean growth for the maritime sector and pathway to zero-emission shipping. The UK has one of the world’s proudest and most innovative maritime heritages. In January 2019, the Government launched Maritime 2050, a landmark strategy setting out our vision for the future of the British maritime sector. The clean maritime plan is the environment route map of Maritime 2050. It identifies ways to tackle air pollutants and greenhouse gas emissions in parallel, while securing clean growth opportunities for the UK. A cleaner shipping industry will help make the air we breathe cleaner and safer, and create a healthy environment for the future.
It builds on the role the UK played as a leading voice in advocating for an ambitious global target to reduce greenhouse gases from shipping. The initial greenhouse strategy agreed by the International Maritime Organisation in 2018, set a target to reduce GHGs from international shipping by at least 50% by 2050 and to phase them out completely as soon as possible in this century. By publishing the clean maritime plan, the UK becomes one of the first countries since the agreement of this initial strategy to publish a national action plan. The plan is also the first cohesive national strategy to reduce domestic shipping emissions, as part of our journey to meeting net zero.
A global transition to clean shipping is taking place, presenting significant opportunities for economic growth. Research undertaken for the Government suggests the global market for maritime emission reduction technologies could reach £11 billion per year by 2050, potentially resulting in economic benefits to the UK of £510 million per year.
To capitalise on this economic opportunity and achieve zero-emission shipping, the clean maritime plan makes the following core commitments:
A call for evidence in 2020 on non-tax incentives to support the transition to zero-emission shipping, as well as a consultation on how the renewable transport fuel obligation could be used to encourage the uptake of low carbon fuels in maritime, and a green finance initiative for maritime, which will be launched at London international shipping week in September.
A working group and study to identify and support potential UK zero-emission shipping clusters.
Government support for clean maritime innovation in the UK.
Funding of £1.3 million to support clean maritime innovation through MarRI-UK; grant support for early stage research projects related to clean maritime; and a clean maritime award to celebrate leaders in the field of emissions reduction.
A maritime emissions regulation advisory service (MERAS), in place by 2020, to provide dedicated support to innovators using zero-emission propulsion technologies.
The plan also contains a number of zero-emission shipping ambitions, outlining the Government’s vision for the future of zero-emission shipping and the milestones that will need to be achieved to reach it.
This plan has been achieved through close co-operation between industry and Government. The Clean Maritime Council, an advisory body of key stakeholders from across the maritime sector, academia and Government, worked alongside Government to develop the strategy, and will continue to work with us to implement the commitments. A full review of the clean maritime plan’s implementation will take place in 2022.
First Annual Procurement and Commercial Report
I have today published DFID’s first annual procurement and commercial report. This provides a summary of DFID’s procurement and commercial practice, complementing the information contained in the Department’s annual report and accounts and meeting the commitment made at the time of DFID’s review of supplier practices in October 2017 to place more information in the public domain. I am placing copies of the report in the Libraries of both Houses.
The UK is an acknowledged world leader in the provision of development and humanitarian aid. Our aid budget acts not only in the interests of the world’s poorest, but also in Britain’s long-term national interest.
Our global leadership in development requires continuing efforts to improve value for money, efficiency, innovation and effectiveness.
The report therefore sets out the progress we have made over the last two years in the introduction of commercial reforms to ensure the best value for taxpayers’ money and the maximum benefit for poor and vulnerable people across the world from our programmes. These reforms include the introduction of a comprehensive code of conduct for DFID’s supply partners, strategic relationship management of our strategic partners, greater transparency of costs, fees and overheads in our funding agreements and measures to promote the engagement of small and medium-sized enterprises in our supply chains.
We will continue to improve our commercial practice, publishing a procurement and commercial report each year so that Parliament and the public can assure themselves directly that UK is being used effectively.