The government will:

(See HM Treasury: Budget 2016, paragraph 2.204 and Overview, paragraphs 2.51 to 2.53.)

The Finance Bill 2016 will insert new provisions into the Income Tax (Trading and Other Income) Act 2005 and the Corporation Tax Act 2009 taxing trading and property income received in a non-monetary form, except where specific taxing provisions already exist.

The changes apply to transactions occurring on or after 16 March 2016 and are intended to clarify existing law and to prevent avoidance involving the receipt of income in a non-monetary form.

(See HM Treasury: Budget 2016, paragraph 2.106 and HMRC: Income and Corporation Tax: trading income received in non-monetary form.)

Draft legislation for inclusion in the Finance Bill 2016 was published for consultation on 9 December 2015. The draft legislation provides for:

At the same time, it was announced that a new asset-based penalty would be introduced with draft legislation to be published in early 2016. That draft legislation has yet to be published.

These measures were confirmed at Budget 2016. It would appear that they will come into force from Royal Assent to the Finance Bill 2016. However, the vital words "Royal Assent" are missing from paragraph 1.77 of the Overview.

To track the progress of these measures, see Tax legislation tracker: compliance, disputes and investigations: Strengthening civil sanctions for offshore evasion.

(See HM Treasury: Budget 2016, paragraph 2.201, Overview, paragraph 1.77.)

The Finance Bill 2017 is to impose a requirement to correct past offshore non-compliance within a defined period of time (not yet specified) to underpin a new disclosure facility. There are to be sanctions (also currently unspecified) for those that fail to meet this requirement. A formal consultation on the details of this requirement is to be launched later in 2016. This measure was announced as part of the March 2015 Budget, replacing disclosure facilities applying specifically to Liechtenstein, Jersey, Guernsey and the Isle of Man (see Legal update, March 2015 Budget: key business tax announcements: Early closure of Liechtenstein and Crown Dependency disclosure facilities).

It should come as no surprise that the government is seeking to plug further perceived gaps in the regime for offshore compliance as it is already in the process of addressing the most serious forms of offshore non-compliance (see Tax legislation tracker: compliance, disputes and investigations: Criminal liability for offshore evasion and Strengthening civil sanctions for offshore evasion).

(See HM Treasury: Budget 2016, paragraph 2.203 and Overview, paragraph 2.57.)

The government has confirmed its intention, announced in the July 2015 Budget, to introduce legislation in the Finance Bill 2016 to empower HMRC to acquire information from online intermediaries and electronic payment providers (see Legal update, July 2015 Budget: key business tax announcements: Increased resources to enable HMRC to tackle non-compliance, avoidance and evasion).

The government also intends to consult in the summer of 2016 on the following measures to tackle tax avoidance in the hidden economy:

(See HM Treasury: Budget 2016, paragraphs 2.196 to 2.199 and Overview, paragraphs 2.60 to 2.62.)

The government intends to consult in the spring of 2016 on a new penalty for participating in VAT fraud. Subject to consultation, legislation to implement the measure may be introduced in the Finance Bill 2017. For background on the existing VAT penalties regime, see Practice note, Tax penalties: VAT.

(See HM Treasury: Budget 2016, paragraph 2.145 and Overview, paragraph 2.54.)

The business tax road map, published on Budget day, summarises the government's plans for reforming business taxation for the rest of the current Parliament. The key themes are to:

The road map document includes (page 33) a useful timeline for the introduction of the changes; we have covered the specific measures in the appropriate sections of this update.

(See HM Treasury: Business tax road map.)

The main rate of corporation tax for non-ring fenced profits will reduce to 17% for the financial year commencing 1 April 2020. The rate will be implemented by the Finance Bill 2016.

The government has promised to keep rates of corporation tax under review as it considers rates to be a key element that drives growth and investment.

For information on corporation tax, see Practice note, Corporation tax: general principles.

(See HMRC: Corporation Tax to 17% in 2020, HM Treasury: Budget 2016, paragraph 2.83, Overview, paragraph 1.28 and HM Treasury: Business tax road map, paragraphs 2.11 to 2.13.)

The government intends to reform the tax treatment of corporation tax losses. It will consult in 2016 on proposals to allow corporation tax losses arising from 1 April 2017:

The government also proposes to restrict, from 1 April 2017, the set off of carried forward losses (whenever arising) to 50% of a company's (or group's) profits that exceed £5 million. From 1 April 2016, the amount of bank profits that can be offset by pre-2015 losses will be reduced from 50% to 25%. However, banks' post-2015 losses and losses to which the existing relief for building societies applies, will be subject to normal rules. For more detail in relation to banks, see Further restriction on carried-forward loss relief for banking sector. Profits and losses which are subject to the oil and gas corporation tax ring fence will be excluded from these changes.

The changes will enable groups to use losses in a more flexible way, while, in line with other major economies, preventing the largest 1% of companies from using carried forward losses to indefinitely defer any liability to corporation tax.

(See HM Treasury: Budget 2016, paragraphs 1.174 to 1.178, 2.102 and 2.111, Overview, paragraph 2.29 and HM Treasury: Business tax road map, paragraphs 2.56 to 2.62.)

Central to the government's business tax road map is the implementation of the OECD's recommendations as part of its base erosion and profit shifting (BEPS) project. For details of this project and its outputs, see Legal update, Final BEPS recommendations published (detailed analysis) and BEPS tracker.

In terms of specific actions, the business tax road map states sets out the following work by the UK government:

(See HM Treasury: Budget 2016, paragraphs 1.207 and 1.208 and HM Treasury: Business tax road map, paragraph 2.29 and box 2.B.)

The government will consult on whether to introduce secondary adjustment rules into the UK's transfer pricing legislation (as to which, see Practice note, Transfer pricing). These rules would address the underlying cash benefit from incorrect transfer pricing and encourage broader compliance with the transfer pricing legislation.

The current transfer pricing legislation taxes a company by reference to the profits that would have been made had the arm's length price been paid but does not adjust the underlying transaction. This means that some of the cash benefit of the original incorrect pricing is not addressed. Secondary adjustments address that benefit by ensuring that the actual allocation of profits is consistent with the primary adjustment made to correct the value of the transaction.

The suggestion that legislation will be introduced to require arm's length prices actually to be paid, rather than deemed to be paid for tax purposes, is likely to be considered as going too far and it is anticipated that such interference with commercial transactions in a manner that transcends dictating the tax consequences will be strongly resisted.

(See HM Treasury: Budget 2016, paragraph 2.100 and Overview, paragraph 2.33.)

The Finance Bill 2016 will update the UK transfer pricing rules (see Practice note, Transfer pricing) to ensure that they refer to the latest version of the OECD's transfer pricing guidelines, incorporating the revisions made as part of the OECD's base erosion and profit shifting (BEPS) project (see Legal update, Final BEPS recommendations published (detailed analysis): Transfer pricing, and Patent box: Notional royalties and Notional marketing royalty (NMR)). It will do this by updating the references in the UK transfer pricing legislation (see Practice notes, Transfer pricing: The impact of the OECD guidelines).

This measure will have effect:

The key impact of the revised guidelines is to align transfer pricing more closely with value creation: see Legal update, Final BEPS recommendations published (detailed analysis): Transfer pricing.

(See HM Treasury: Budget 2016, paragraph 2.101, Overview, paragraph 1.45 and HM Treasury: Business tax road map, box 2.B.)

The Finance Bill 2016 will link the corporation tax rate charged on close company loans to participators to the dividend upper rate. As a result, the rate of tax charged on close company loans to participators (and other arrangements conferring benefits on participators that are taxed in the same way as loans) will increase from 25% to 32.5%, with effect for loans, advances and arrangements made on or after 6 April 2016.

The close company "loans to participators" rules are intended to stop owners of closely controlled companies avoiding tax by taking loans rather than dividends. The legislation will ensure that the rate of corporation tax charged on close company loans mirrors the new dividend upper rate, also to be introduced from 6 April 2016. For further background on the loans to participators rules, see Practice note, Close companies: tax: Close company loans and benefits to participators and for more information on the changes to dividend taxation from April 2016, see Practice note, Dividends: tax rules for individuals, exempt funds and non-residents: Proposed changes to dividend taxation from April 2016.

(See HM Treasury: Budget 2016, paragraphs 1.151 and 2.412, Overview, paragraph 1.34 and HMRC: Corporation Tax: rate of tax for the loans to participators charge.)

The government is to consult on whether the substantial shareholdings exemption continues to deliver on its original policy objectives in the light of developments in the UK and international corporate tax contexts. The consultation will include a review of whether changes to the exemption could increase its simplicity, coherence and international competitiveness.

For an overview of the substantial shareholdings exemption, see Practice note, Substantial shareholdings exemption.

(See HM Treasury: Budget 2016, paragraph 2.120, Overview, paragraph 2.31 and HM Treasury: Business tax road map, paragraphs 2.63 to 2.65.)

The government will publish a discussion document in the spring setting out alternatives for the tax treatment of leases of plant and machinery in response to the IASB's new lease accounting standard (IFRS 16) (as to which, see Legal update, New lease accounting standard, IFRS 16).

(See HM Treasury: Budget 2016, paragraph 2.92 and Overview, paragraph 2.20.)

The Finance Bill 2016 will change the period in which enhanced capital allowances are available in Enterprise Zones. The period will be eight years from the date the zone is established. The legislation will have effect from Royal Assent to the Finance Bill 2016.

For discussion about enhanced capital allowances, see Practice note, Capital allowances on property transactions: Enhanced capital allowances.

(See HMRC: Extension of enhanced capital allowances for Enterprise Zones, HM Treasury: Budget 2016, paragraphs 1.283 and 2.312, Overview, paragraphs 1.20 and 2.17 and HM Government: Budget 2016: policy costings, page 60.)

The lists of qualifying energy-saving and water-efficient technologies that qualify for enhanced capital allowances will be updated to:

The changes will be made by a statutory instrument to be made in July 2016, subject to receiving state aid approval.

For information on enhanced capital allowances, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies.

(See HM Treasury: Budget 2016, paragraph 2.181, Overview, paragraph 2.19 and HM Government: Budget 2016: policy costings, page 36.)

The government will consult on how to expand support that can be given to grassroots sport through the corporation tax system. The government announced at the 2015 Autumn Statement that it would launch this consultation (see Legal update, 2015 Autumn Statement and Spending Review: key business tax announcements: Corporation tax relief for contributions to grassroots sport).

(See HM Treasury: Budget 2016, paragraph 2.89 and Overview, paragraph 2.35.)

The government will extend the 100% first year allowance (FYA) for businesses purchasing low emission cars for a further three years to April 2021. From April 2018, the CO2 emission threshold below which cars are eligible for the FYA will be reduced from 75 grams per kilometre to 50 grams per kilometre. For more information about the FYA, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies: Cars with low carbon dioxide emissions.

From April 2018, the government will reduce the CO2 emission threshold for the main rate of capital allowances for business cars (section 104AA, Capital Allowances Act 2001) from 130 grams per kilometre to 110 grams per kilometre.

The government will review the case for the FYA and the appropriate business cars emission thresholds from 2021 at Budget 2019.

A Tax Information and Impact Note will be published with the statutory instrument (presumably for the FYA changes) later in 2016.

(See HM Treasury: Budget 2016, paragraph 2.90, Overview, paragraph 2.16 and HM Government: Budget 2016: policy costings, page 23.)

The introduction of new corporation tax instalment payment dates for companies with annual taxable profits of at least £20 million has been delayed and will now apply to accounting periods starting on or after 1 April 2019. For details of the revised payment schedule, which was announced in the July 2015 Budget and originally intended to apply to accounting periods starting on or after 1 April 2017, see Legal update, Very large companies instalment payments draft regulations. We are tracking the measure in Tax legislation tracker: compliance, disputes and investigations: Corporation tax payment dates.

(See HM Treasury: Budget 2016, paragraphs 1.189 and 2.84, Overview, paragraph 2.34 and HM Treasury: Business tax road map, paragraphs 2.78 to 2.79.)

Following consultation, the government will amend the draft Finance Bill 2016 legislation introducing, for large businesses, a requirement to publish an annual tax strategy and a new "special measures" regime (for businesses with an ongoing history of aggressive tax planning and/or refusing to engage with HMRC), to clarify the entities that will be subject to the new rules. For details of the measures, see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: Improving business tax compliance. We are tracking the draft legislation in Tax legislation tracker: compliance, disputes and investigations: Special measures for persistently aggressive large businesses.

(See HM Treasury: Budget 2016, paragraph 2.93 and Overview, paragraph 1.76.)

From 2018 businesses, self-employed individuals and landlords who are keeping records digitally and providing regular digital updates to HMRC will be able to pay their tax bills "as they go" to better manage their cash flow. HMRC will consult on this proposal and the other elements of the government's making tax digital proposals (as to which, see Legal update, Digital tax accounting: HMRC vision to transform tax administration by 2020 later in 2016. The consultations will cover the use of digital tools to keep records and report information to HMRC, options to make greater use of third party data to prepopulate digital tax accounts and changes to the tax administration framework to reflect the transition to digital. Responses to these consultations will be published at the 2016 Autumn Statement and draft legislation will be included in the Finance Bill 2017.

The government will also explore options to simplify the tax rules for these groups, and will provide support to businesses. In particular, the government will:

To track these developments, see Tax legislation tracker: compliance, disputes and investigations: Digital tax accounts.

(See HM Treasury: Budget 2016, paragraphs 1.184, 1.185 and 2.212, Overview, paragraphs 2.55 and 2.56 and HM Treasury: Business tax road map, paragraphs 2.71, 2.72 and 2.74 to 2.76.)

The Finance Bill 2016 will empower HMRC to make an assessment of a person's income tax or capital gains tax liability without their first being required to complete a self-assessment return and if HMRC has sufficient information about that individual to make the assessment.

HMRC published draft legislation for consultation in December 2015 (see Tax legislation tracker: compliance, disputes and investigations: Simple assessment). Following consultation, HMRC has increased to 60 days the time limit for customers to dispute the amount due in their assessment and has clarified the arrangements for interest and late payment penalties to align these with interest and late payment penalties for self-assessment.

This measure will have effect from the date of Royal Assent to the Bill.

(See HM Treasury: Budget 2016, paragraph 2.211 and Overview, paragraph 1.78.)

The Finance Bill 2016 will give HMRC the following powers from 1 July 2016 to help the UK improve the monitoring of tax state aids and compliance with state aid guidelines as part of the European Commission's state aid modernisation project (as to which, see State aid modernisation: consultation tracker):

The relevant reliefs include:

For more information about state aid, see Practice note, Competition regime: State aids: What is a state aid?.

(See HM Treasury: Budget 2016, paragraph 2.208, Overview, paragraph 1.75 and HMRC: State aid modernisation: TIIN.)

Section 52 of the Finance (No. 2) Act 2015 (section 52) will be amended with the effect that the rate of interest payable on tax-related debts following court action will also apply to Scotland, Northern Ireland and to national insurance contribution (NIC) related debts. This measure ensures that consistent rates of interest apply across the UK on all tax and NIC debts.

For information on section 52, which was introduced following an announcement in the July 2015 Budget, see Legal update, July 2015 Budget: key business tax announcements: Interest rates for tax-related interest debts to be simplified.

(See HM Treasury: Budget 2016, paragraph 2.82.)

The government has confirmed that the Finance Bill 2016 will include legislation to provide that HMRC's general statutory power to set off amounts that are payable (or to be repaid) by it to a person against any sums payable by that person to HMRC covers Scotland as well as the rest of the UK.

This measure was first announced in the 2015 Autumn Statement and Spending Review, following which it was consulted on (see Legal update, 2015 Autumn Statement and Spending Review: key business tax announcements: HMRC's set-off rights to apply in Scotland).

(See HM Treasury: Budget 2016, paragraph 2.80.)

The government has announced that it is introducing income tax rates that apply to savings that are separate from the main rates that apply to income that is neither savings income nor dividend income. The change will mean that the basic, higher and additional rates that currently apply to UK savings will become the:

The government will also introduce a "default rate" of income tax that will apply to the non-savings, non-dividend income of a very narrow category of taxpayers (primarily trustees and non-residents) that fall into neither the UK main rates or savings rates nor the Scottish rates of income tax.

The UK main rates will apply to the income of UK resident individuals that is neither savings nor dividend income. Those rates will not apply to Scottish residents or those subject to the default rate of income tax.

The proposals are intended to ensure that the "English Votes for English Laws" procedure can apply to the main rates of income tax.

At present, UK income tax rates apply across the whole of the UK to non-savings, non-dividends income, dividend income and savings income. It has now become necessary for these to be separated out, given that from April 2017, Scotland will have full control over the rates and thresholds of income tax for non-savings and non-dividend income of Scottish taxpayers.

Legislation to implement these measures will be introduced in the Finance Bill 2016 and will take effect from 6 April 2017.

(See HM Treasury: Budget 2016, paragraphs 1.261 and 2.22, Overview, paragraph 1.3 and HMRC: Applying 'English Votes for English Laws' to Income Tax.)

The government believes that there is broad support within Northern Ireland for a corporation tax rate of 12.5% to be introduced from 2018.

This follows a confirmation at the Autumn Statement 2015 of the government's commitment to devolve corporate tax rate setting powers to Northern Ireland to commence in April 2018 (Legal update, 2015 Autumn Statement and Spending Review: key business tax announcements: Northern Ireland: devolving corporation tax powers).

(See HM Treasury: Budget 2016, paragraph 1.262.)

The government has confirmed that it is committed to delivering Welsh rates of income tax, alongside the devolution of other powers to Wales. For our coverage of Welsh devolution, see Toolkit, Welsh devolution.

(See HM Treasury: Budget 2016, paragraph 1.273.)

From April 2018, termination payments that are subject to income tax on amounts in excess of £30,000 will be subject to employer national insurance contributions. The government confirmed that the £30,000 exemption will remain and that the whole termination payment will be outside the scope of employee NICs. In addition, legislation will be introduced to ensure that all payments in lieu of notice and certain damages payments are taxed as earnings. The foreign service exemption will be abolished. These changes will be introduced in the Finance Bill 2017 and a future National Insurance Contributions Bill, and a technical consultation will be published in the summer 2016.

While the employer NICs announcement is a response to concerns that employers manipulate the current rules, the other announcements appear to derive from the consultation on simplifying the tax treatment of termination payments (see Legal update, Consultation on simplifying tax and NICs on termination payments). The government has yet to publish a summary of responses.

For an overview of the tax treatment of termination payments, see Practice note, Taxation of termination payments. To track the progress of the measures to implementation, see Tax legislation tracker: employment: Termination payment rules: simplification.

(See HM Treasury: Budget 2016, paragraphs 1.144 to 1.146 and 2.26 and Overview, paragraph 2.10.)

In the light of concerns about the growth of salary sacrifice arrangements, the government announced that it is considering limiting the benefits that attract tax and NICs advantages when provided as part of a salary sacrifice arrangement. The government confirmed, however, that salary sacrifice for enhanced employer pension contributions, childcare benefits and health-related benefits, such as the cycle to work scheme, would continue to benefit from tax and NICs relief if provided through salary sacrifice.

For an overview of salary sacrifice arrangements, see Practice note, Salary sacrifice arrangements.

(See HM Treasury: Budget 2016, paragraphs 1.147 and 2.35 and Overview, paragraph 2.4.)

Under the proposed apprenticeship levy (to be introduced from April 2017), employers will receive a government payment equal to 10% of their monthly apprenticeship levy contributions that will be available for them to spend on apprenticeship training. Further details are expected in April 2016 and the government will amend the draft Finance Bill 2016 legislation implementing the levy (see Legal update, Draft apprenticeship levy legislation published) to include the measure.

We are tracking the apprenticeship levy in Tax legislation tracker: employment: Apprenticeship levy.

(See HM Treasury: Budget 2016, paragraphs 1.98, 1.99 and 2.243 and Overview, paragraph 1.56.)

Some benefits are taxed on the basis of rules that specify the amount of the taxable benefit. These include living accommodation, cars, vans and related benefits, and beneficial loans. The rest are taxable on the cost to the employer of providing the benefit. In the latter case, if the employee reimburses the employer the cost of providing the benefit, there is no tax to pay as the employee has made a fair bargain. Legislation will be introduced in the Finance Bill 2016 to put beyond doubt that the fair bargain concept does not apply to the above-mentioned benefits. The taxable amount will be calculated in accordance with the specific rules, less any contribution made by the employee. The measure will take effect from 6 April 2016.

The government will also consult over the summer on proposals to align the dates by which an employee has to "make good" the cost of a benefit in kind to reduce their tax charge.

For a discussion about the taxation of employee benefits, see Practice note, Taxation of employees: benefits and expenses.

(See HMRC: Income Tax: preventing liability to charge being removed from certain taxable benefits in kind, Overview, paragraphs 1.7 and 2.3 and HM Treasury: Budget 2016, paragraph 2.36.)

The government confirmed that it will launch the new tax-free childcare scheme as anticipated in early 2017, but that the existing employer‑supported childcare voucher scheme will remain open to new entrants until April 2018 (previously, it was anticipated that the existing scheme would close once the new scheme launched). Accordingly, employees joining an employer-supported childcare voucher scheme before April 2018 will be able to access the associated tax and NICs benefits for so long as the employer maintains the scheme. Many employers provide childcare vouchers through salary sacrifice arrangements whereas the new scheme is not operated via employers. The change to the new scheme could therefore have significant cost implications for employers. (Workplace nurseries are not affected by the new scheme.)

To track developments, see Tax legislation tracker: employment: Tax-free childcare scheme.

(See HM Treasury: Budget 2016, paragraphs 1.138 and 2.77, Overview, paragraph 2.26 and HM Government: Budget 2016: policy costings, page 50.)

The Finance Bill 2016 will amend primary legislation to empower HMRC to amend the Income Tax (Pay as you Earn) Regulations 2003 (2003/2682) (PAYE regulations) to include non-cash vouchers and credit tokens within the list of benefits that can be subject to voluntary payrolling. HMRC will amend the PAYE regulations in the summer of 2016 so that voluntary payrolling of non-cash vouchers and credit tokens will be permissible from 6 April 2017.

Following a recommendation of the Office of Tax Simplification, legislation was introduced in the Finance Act 2015 to empower HMRC to amend the PAYE regulations to permit employers to payroll certain benefits. These were all benefits other than accommodation, beneficial loans, and non-cash vouchers and credit tokens. Regulations were made on 23 November 2015 to implement voluntary payrolling of these benefits from 6 April 2016. The measure extends voluntary payrolling to non-cash vouchers and credit tokens.

For further discussion about voluntary payrolling, see Practice note, Pay as you earn (PAYE): PAYE reporting of non-cash benefits and expenses and voluntary payrolling.

(See HMRC: Extending the real time collection of tax on benefits in kind: voluntary payrolling, Overview, paragraph 1.9 and HM Treasury: Budget 2016, paragraph 2.36.)

The government will consult on the simplification of the process of applying for and agreeing PAYE settlement agreements over the summer. This is in response to the Office of Tax Simplification's review of employee benefits and expenses (see Tax legislation tracker: employment: Review of employee benefits and expenses).

For information on PAYE settlement agreements, see Practice note, Pay as you earn (PAYE): Dispensations and PAYE settlement agreements.

(See Overview, paragraph 2.58.)

Following a consultation that ran from 23 September 2015 until 16 December 2015 on the reform of the tax rules for travel and subsistence, the government has announced that it does not intend to change the rules. A summary of responses will be published shortly and the government will continue to look for simplifications in this area. [30 March 2016 note: A summary of responses, dated 24 March 2016, was subsequently published (see HMT and HMRC: Consultation outcome: Travel and subsistence framework: discussion paper).]

The draft Finance Bill 2016 legislation to prevent workers employed through intermediaries from receiving tax free reimbursement of travel and subsistence in circumstances where direct employees would be liable to tax, published on 9 December 2015, is unaffected by this decision and will be enacted as expected. There will be amendments to allow grouped companies to second workers within the group, to prevent the misuse of personal service companies in order to avoid the restrictions and to improve clarity and correct errors. For background, see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: Employment intermediaries and relief for travel and subsistence.

(See HM Treasury: Budget 2016, paragraphs 2.38 and 2.39. and Overview, paragraphs 1.11 and 2.5)

The government has confirmed that the Finance Bill 2016 will make changes to company car tax rates that were announced in the March and July 2015 Budgets (see Legal update, July 2015 Budget: key business tax announcements: Company car rates for 2019-20). For 2019-20, the appropriate percentage of a company car's list price subject to tax will increase by 3 percentage points for cars emitting more than 75 gCO2/km, to a maximum of 37%. There will be a 3 percentage point differential between the 0-50 and 51-75 gCO2/km bands and between the 51- 75 and 76-94 gCO2/km bands.

For cars that do not have a CO2 figure and cannot, under any circumstances, produce CO2 emissions, the rates will be:

The government also announced that the current van benefit charge will increase by the retail prices index from 6 April 2017. The current van benefit charge for zero-emissions vans (20% of the value of the van benefit charge for vans emitting CO2) will not increase to 40% in 2016-17, as proposed in the March 2015 Budget (see Legal update, March 2015 Budget: key business tax announcements: Cars, vans and related fuel benefits). Instead, the benefit will remain at 20% for 2016-17 and 2017-18. Future rates will be:

From 2022-23, emissions will no longer be relevant because there will be a single van benefit charge applying to all vans.

The government will review the impact of the reduced van benefit charge, along with the enhanced capital allowances available for zero-emissions vans at the time of 2018 Budget.

(See HM Treasury: Budget 2016, paragraphs 2.162 and 2.168, HMRC: Setting Company Car Tax (CCT) rates for the 3 years to 2019 to 2020, Overview, paragraphs 1.5, 1.6, 2.2 and 2.6 and HMRC: Van Benefit Charge for Zero Emissions Vans.)

From 2020-21, the government will continue to base company car tax on the CO2 emissions of cars (see Practice note, Taxation of employees: benefits and expenses: Cars) and will consult on reforming the bands for ultra-low emission vehicles (below 75 grams of carbon dioxide per kilometre) to refocus incentives on the cleanest cars.

At Budget 2013, the government committed to review at Budget 2016 the incentives for ultra-low emission vehicles in light of market developments.

(See HM Treasury: Budget 2016, paragraphs 1.193 and 2.166 and Overview, paragraph 2.6.)

The government has announced that, with effect from 6 April 2017, public sector employers that contract with personal service companies (PSCs) for the supply of workers will have to consider the nature of the engagement and, where applicable, deduct employee tax and NICs from the payments they make to the PSC. The public sector body will also be responsible for the employer's NIC in place of the PSC. The government will consult on the detail of the proposed changes and will include the amendments to the legislation in the Finance Bill 2017.

For several years, the government has attempted to reform the intermediaries' legislation to prevent workers from gaining a tax and NIC advantage by supplying their services through a personal services company instead of being included on the payroll of the company to which their services are supplied. Legislation already exists for profits of PSCs to be treated as notional earnings subject to tax and NICs if they relate to an engagement that has the nature of employment (see Practice note, IR35) and for employment intermediaries to account for tax and NIC in relation to workers they supply, whether directly or indirectly to an end client (see Practice note, Tax and reporting obligations of employment intermediaries and businesses contracting with them). This legislation will continue to apply in the private sector, while special rules will be introduced for the supply of workers to the public sector.

(See HMRC: Off-payroll working in the public sector: reforming the intermediaries legislation, HM Treasury: Budget 2016, paragraphs 1.148 to 1.150 and 2.40, Overview, paragraph 2.9 and HM Government: Budget 2016: policy costings, page 38, B.15.)

Employers will be denied the national insurance contributions (NICs) employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers. This measure will be introduced by regulations and will apply from tax year 2017 to 2018 with exclusions coming into force from 2018 to 2019.

For information on the NICs and the employment allowance, see Practice note, Taxation of employees: National insurance contributions.

(See HM Treasury: Budget 2016, paragraph 2.24 and Overview, paragraph 2.66.)

The government has announced the "biggest business energy tax reforms since the taxes were introduced". The government will:

For more detail on this and the environmental announcements in the Budget, see Legal updates, 2016 Budget: key environmental announcements.

The government has confirmed its intention to introduce wide-sweeping changes to the tax deductibility of interest for companies. This follows a consultation in this area launched on 22 October 2015 and is intended to implement the OECD's base erosion and profit shifting (BEPS) project recommendations in this area (see Legal update, Government consults on changes to tax deductibility of interest for companies, Tax legislation tracker: finance: Restrictions on interest deductibility and Final BEPS recommendations published (detailed analysis): Interest deductibility).

As part of the 2016 Budget, the government announced that:

The rules, which are forecast to generate nearly £4 billion of revenue for the Exchequer between 2017-18 and 2020-21, and to increase the cost of capital, are to be included in the Finance Bill 2017 and to apply from 1 April 2017. The government states that it will conduct further consultation on the detailed design of all aspects of the rules "in due course" and will continue to engage with the OECD on the design of rules to prevent BEPS involving interest in the banking and insurance sectors (see Legal updates, Final BEPS recommendations published (detailed analysis): Banking and insurance sectors and Government consults on changes to tax deductibility of interest for companies: Banking and insurance sectors). The government will also consult further on the impact of the rules on the oil and gas sector, seeking to avoid an adverse impact on existing commercial arrangements.

(See HM Treasury: Budget 2016, paragraphs 1.209, 1.210, 2.97 and 2.136, HM Treasury: Business tax road map, paragraphs 2.19 and 2.30 to 2.37, box 2.B and chart 2.C, HM Government: Budget 2016: policy costings, page 17 and certification of policy costings, paragraph B.28 and Overview, paragraph 2.28.)

The government has confirmed that the Finance Bill 2016 will include rules to counteract attempted tax avoidance using "hybrid mismatches" with effect from 1 January 2017. For details of the draft legislation published on 9 December 2015, see Practice note, Hybrid tax mismatches.

However, as part of the 2016 Budget, the government announced that the rules will be extended to include mismatch arrangements including permanent establishments. The government notes that permanent establishments may be used in a similar way to partnerships and other hybrid entities, the use of which is covered by the existing draft legislation (see Practice note, Hybrid tax mismatches: Mismatches from hybrid payer entities and Mismatches from hybrid payee entities). The revised rules will target the use of permanent establishments used to seek deductions without corresponding taxation, double deductions or imported mismatches (see Practice note, Hybrid tax mismatches: Imported mismatches). The example given is of a permanent establishment the profits of which are not taxable in the territory of residence of the business, as that territory does not tax permanent establishment profits, but are also not taxable in the territory of the permanent establishment, as that establishment does not constitute a sufficient presence to be taxable in that territory.

The government comments that the inclusion of permanent establishments in the rules is necessary to prevent taxpayers from sidestepping the hybrid mismatch rules. It would seem that the government anticipates this revision as making a material difference: the Office for Budget Responsibility's forecast positive impact on the Exchequer was £350 million between 2016-17 and 2020-21 when the draft legislation was originally published but has now risen to £950 million.

(See HMRC: Corporation Tax: anti-hybrids rules, HM Treasury: Budget 2016, paragraphs 1.212 and 2.98, HM Treasury: Business tax road map, paragraphs 1.16, 2.38 and 2.39, box 2.B and chart 2.D, Overview, paragraph 1.29 and HM Government: Budget 2016: policy costings, page 19.)

The Finance Bill 2016 is to amend the power of HM Treasury to make or amend regulations concerning the tax treatment of securitisation companies. At present, the power only extends to corporation tax but the Finance Bill 2016 provision will extend this to other taxes. (For a discussion of the current UK tax treatment of securitisations, see Practice note, Securitisation: tax; in relation to existing regulations, see Practice note, Securitisation: tax: True sale securitisation: corporation tax treatment of the SPV issuer and Other special securitisation regimes.)

The driver behind this change is uncertainty over the withholding tax treatment of residual payments made by securitisation companies. These companies often hold more financial assets than they require to repay investors, meet transaction costs and retain a profit (so as to protect against possible poor asset performance and to maximise the company's credit rating). The excess is paid out by way of "residual payments". However, a question has arisen as to whether residual payments may be classified as "annual payments" and so be subject to withholding tax (see Practice note, Withholding tax: "Annual payments"). Currently, HMRC clearance may be required to be sure that no withholding is required. However, under HM Treasury's extended power, existing regulations will be amended to make it clear that no withholding arises on residual payments.

The Finance Bill 2016 provision will have effect from Royal Assent and the regulations will be made following consultation (with the effective date yet to be specified). The government states that the regulations will be developed as part of wider ongoing consultation with industry to update and modernise the tax regime for UK securitisation companies.

This will, of course, be a welcome simplification for the securitisation sector but, until the commencement date of the regulations is known, it is advisable to seek HMRC clearance as early as possible if the question of withholding on residual payments arises.

(See HMRC: Corporation Tax: securitisation and annual payments, Overview, paragraph 1.41 and HM Treasury: Budget 2016, paragraph 2.110.)

The Finance Bill 2017 will abolish the requirement to deduct income tax at source from:

These changes will have effect from 6 April 2017.

This measure aims to bring the withholding treatment of these types of interest into line with the withholding treatment of interest paid by banks and building societies on the introduction of the personal savings allowance (see Tax legislation tracker: miscellaneous: Personal savings allowance). For those whose savings income all falls within the personal savings allowance, this will be a simplification measure as there will be no need to reclaim tax withheld. For others, there will be a need to account for tax that would otherwise have been withheld from amounts exceeding the allowance, but the alternative would have been reclaiming tax withheld on amounts within the allowance (which would, perhaps, have been just as burdensome) and abolishing withholding means that tax is paid later, giving a potential cash-flow advantage to taxpayers.

(See HM Treasury: Budget 2016, paragraph 2.56, Overview, paragraph 2.11 and HM Government: Budget 2016: policy costings, page 10.)

The government will review its double tax treaty passport (DTTP) scheme, which aims to accelerate the process for obtaining relief from withholding from interest (see Practice note, Withholding tax: Double tax treaty passport scheme).

A consultation is to be launched later in 2016, examining whether the DTTP scheme still meets the needs of UK borrowers and foreign investors. The consultation will also seek to determine whether the scheme should be extended to a wider range of foreign investors, including sovereign wealth funds, pension funds and partnerships, with the aim of encouraging foreign funds that already have investment management activity in the UK to carry out more of their activity here.

(See HM Treasury: Business tax road map, paragraphs 2.63 and 2.66 to 2.68.)

The government has finalised for the Finance Bill 2016 the "income-based carried interest" rules that determine when asset managers pay capital gains tax rather than income tax on their performance related returns (carried interest). These new rules are designed to ensure that carried interest is taxed as a capital gain only when the fund undertakes long-term investment activity (with investment horizons greater than three years). The new rules will apply in relation to sums arising to managers on or after 6 April 2016.

Eligibility for capital gains tax treatment will be determined by the length of time for which the underlying scheme holds its investments on average. Full CGT treatment will apply where the average hold period is 40 months or more (rather than the 48 months set out in the December 2015 draft legislation). Additional bespoke calculation rules will also be included for additional asset classes, including venture capital and real estate, together with other minor changes.

For a discussion of the draft Finance Bill 2016 legislation published in December 2015, see Practice note, Income-based carried interest: tax.

(See HM Treasury: Budget 2016, paragraphs 1.225 and 2.104, Overview, paragraph 1.26 and HM Government: Budget 2016: policy costings, page 47.)

The Finance Bill 2016 is to include further restrictions on the use of carried-forward losses for banking companies.

Relief for carried-forward trading losses, non-trading loan relationship deficits (see Practice note, Loan relationships: Relieving non-trading loan relationship deficits) and management expenses (see Practice note, Corporation tax: general principles: Expenses of management) of banks, building societies and savings banks is already restricted: only 50% of such entities' taxable profits can be set against such carried-forward amounts (subject to a £25 million allowance for groups headed by a building society) from 1 April 2015 (with anti-avoidance and anti-forestalling provisions applying from 3 December 2014): see Practice note, Tax for banking lawyers: Restricted loss relief.

Under the Finance Bill 2016 legislation, the relevant percentage will be reduced from 50% to 25%. This measure will continue to apply to losses, deficits and expenses accruing before 1 April 2015 and will have effect for accounting periods beginning on or after 1 April 2016. If an accounting period straddles this date, it will be deemed to be split for these purposes, with profits allocated on a time-apportioned or otherwise "just and reasonable" basis.

The rationale expressed for the original restriction on carried-forward pre-2015 losses was that the banking sector had accumulated significant losses as a result of, among other things, its performance during the financial crisis and the government sought to end what it considered to be the inequity of banks using the affected reliefs to reduce their tax. This new measure may be seen as merely consequential on the halving of carried-forward loss relief against profits exceeding £5 million, although the government states that this will "rightfully maintain the exceptional treatment of banks' losses relating to the financial crisis and subsequent misconduct scandals". However, it will have a material adverse impact on the banking sector: the government estimates that this will generate over £2 billion in extra revenue between 2016-17 and 2020-21; although the government states that the measure should be revenue-neutral in the long run for any given company, the timing effect of the measure (spreading out the full recognition of pre-2015 losses) may well have negative cash-flow implications.

The banking sector may well be weary from the increasing raft of tax measures aimed at it, such as the bank levy, the banking company tax surcharge, the restriction of deductions for compensation payments and the code of practice on taxation for banks (see Practice notes, Bank levy, Banking company tax surcharge, Lending activities: tax: Commercial loans: corporation tax and Code of practice on taxation for banks); questions may well be raised as to whether (and, if so, when) this will prompt multinational banking enterprises that have a choice as to location to seek a less costly environment.

(See HMRC: Corporation Tax: update to bank loss relief restriction, HM Treasury: Budget 2016, paragraphs 1.178 and 2.111, HM Treasury: Business tax road map, paragraphs 2.60 to 2.62 and box 2.C, Overview, paragraph 1.36 and HM Government: Budget 2016: policy costings, page 21 and certification of policy costings, paragraph B.19.)

The Finance Bill 2016 will include legislation widening the scope of exclusions from the definition of a banking company used in:

For the definition of an excluded entity (which is substantively the same in all cases, albeit contained in different legislative provisions), see Practice note, Bank levy: Excluded entity.

Under the Finance Bill 2016 legislation, an entity will not be prevented from being excluded from the definition of a banking company solely because it carries on a second activity, as long as both of the following apply:

Allowing firms in the banking sector to benefit from exemption from measures such as loss relief restriction and the banking company tax surcharge while carrying out secondary activities adds welcome flexibility. However, it is questionable why the bank levy is not included in this measure given that the stated aim is to ensure appropriate targeting of banking tax measures and the code of practice refers to definitions in the bank levy rules in setting out HMRC's reporting requirements (see Practice note, Code of practice on taxation for banks: HMRC reports on code). This being the case, it may not be surprising if the bank levy rules are added to the list of affected legislation as this measure progresses.

(See HMRC: Banking companies: excluded entities, Overview, paragraph 1.35 and HM Treasury: Budget 2016, paragraph 2.112.)

The government has revised the draft Finance Bill 2016 legislation proposing that shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will be subject to stamp duty or stamp duty reserve tax (SDRT) at a rate of 1.5% of the higher of the market value of the shares or the option strike price. The measure will now apply to options entered into on or after 25 November 2015 and exercised on or after 23 March 2016 (rather than 16 March, as originally proposed). The change will allow the measure to take effect for both stamp duty and SDRT at the same time.

For background on the proposal, which was first announced in the 2015 Autumn Statement, see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: Stamp taxes on options. We are tracking the measure to implementation in Tax legislation tracker: corporate: Stamp taxes on options.

(See HM Treasury: Budget 2016, paragraph 2.117 and Overview, paragraph 1.62.)

The government has again confirmed that the Finance Bill 2016 will introduce an SDLT seeding relief for property authorised investment funds (PAIFs) and co-ownership authorised contractual schemes (CoACSs). The legislation will also provide that transactions in units in CoACSs will not be subject to SDLT. The changes will take effect from the date that the Finance Bill 2016 receives Royal Assent.

These measures were consulted on in July 2014 and the government confirmed its intention to introduce them in the 2014 Autumn Statement, the March 2015 Budget, the July 2015 Budget and the 2015 Autumn Statement (see Tax legislation tracker: property, energy and environment: PAIFs seeding SDLT relief). The draft legislation was published on 9 December 2015 (see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: SDLT seeding relief for PAIFs and co-ownership ACSs). For a discussion of the draft legislation, see Practice notes, Property authorised investment funds: tax: Seeding relief, Authorised contractual schemes: tax: Acquisitions of land by ACS and Transfer of units in co-ownership ACS. The government has stated that some minor technical changes have been made to the draft legislation. We will, therefore, amend these practice notes once the revised legislation is published.

(See HM Treasury: Budget 2016, paragraph 2.184 and Overview, paragraph 1.60.)

The government has announced that it will consult on streamlining the tax rules and reporting requirements for authorised contractual schemes (ACSs) later in the year. Any legislation will be included in the Finance Bill 2017 or secondary legislation.

For information on the tax treatment of ACSs, see Practice note, Authorised contractual schemes: tax.

(See HM Treasury: Budget 2016, paragraph 2.105 and Overview, paragraph 2.25.)

The Finance Bill 2016 will contain legislation providing additional obligations to deduct income tax at source from royalties paid to non-resident persons in the following circumstances:

The measures are designed to align the UK deduction of tax at source regime for royalties with the UK taxing rights over such income and counteract contrived arrangements that are used typically by large multi-national enterprises that result in the erosion of the UK tax base. The government has published draft legislation, a draft explanatory note and a technical note on the measures.

For a discussion of the UK's withholding tax regime, see Practice note, Withholding tax. For an introduction to the purpose and interpretation of double tax treaties, see Practice note, Double tax treaties: an introduction.

Taking each circumstance outlined above in turn:

(See HM Treasury: Budget 2016, paragraphs 1.211 and 2.96, Overview, paragraph 1.30, HM Treasury: Business tax road map, paragraph 2.40, HM Government: Budget 2016: policy costings, page 18 and HMRC: Income Tax: royalty withholding tax: TIIN.)

The government has confirmed that it will make the patent box BEPS-compliant, making the lower tax rate dependant on and proportional to the extent of R&D expenditure incurred by the company claiming the relief. This will come into effect on 1 July 2016.

The government published draft Finance Bill 2016 legislation to this effect in December 2015. For a detailed examination of the patent box as modified by the draft Finance Bill 2016, see Practice note, Patent box.

(See HM Treasury: Budget 2016, paragraph 2.99, HM Treasury: Business tax road map, paragraph 2.29, Overview, paragraph 1.31 and HM Government: Budget 2016: policy costings, page 22.)

Vaccine research relief, which entitles large companies to corporation tax relief for spending on R&D relating to vaccines and medicines for the prevention and treatment of certain diseases, will cease to apply to expenditure incurred on or after 1 April 2017. The relief will be abolished due to a low take-up and the expiry of state aid approval on 31 March 2017.

For more details on the relief, see Practice note, R&D tax reliefs: practical aspects: Vaccine research relief.

(See HM Treasury: Budget 2016, paragraph 2.85, Overview, paragraph 1.32 and HMRC: Vaccine research relief: expiry in 2017.)

The Finance Bill 2016 will implement changes that amend the calculation of the small and medium size enterprises (SMEs) state aid cap that applies to research and development (R&D) expenditure. The changes will mean that SMEs' entitlement will not be adversely affected by the expiry of Large Company relief on 31 March 2016. State aid is capped at €7.5 million for any one project but, currently, SMEs do not have to include in the calculation any notional amount that could be claimed under Large Company Relief as this is not a state aid. The amendments to the legislation will create a notional credit for such expenditure when the Large Company regime is replaced by the R&D Expenditure Credit on 1 April 2016.

SMEs are entitled to claim an enhanced deduction for R&D expenditure which reduces the tax payable and increases tax losses. Under certain circumstances they can surrender their losses. For more information, see Practice note, R&D tax reliefs: practical aspects: SME relief.

(See HMRC: Update to the Small and Medium-Sized Enterprises Research and Development relief: state aid cap calculation, HM Treasury: Budget 2016, paragraph 2.86, Overview, paragraph 1.33 and Annex A (at page 95).)

In summer 2016, the government will consult on a new corporation tax relief, effective from 1 April 2017, designed to encourage museums and galleries to develop creative new exhibitions and display their collections across the country. The relief will be available for the costs of developing temporary or touring exhibitions and the legislation will be in the Finance Bill 2017.

The government has also broadened the eligibility criteria for the VAT refund scheme for museums and galleries from 16 March 2016. The Department for Culture, Media & Sport has published guidance on the new criteria, which supports a wider range of free museums across the UK.

(See HM Treasury: Budget 2016, paragraphs 1.254, 1.255, 2.87 and 2.151, Overview, paragraph 2.30 and Department for Culture, Media & Sport: VAT refunds for museums and galleries.)

The government will legislate in the Finance Bill 2016 to:

(See HM Treasury: Budget 2016, paragraph 1.195, HM Treasury: Business tax road map, paragraphs 2.16 to 2.18, Overview, paragraphs 1.37, 1.38 and 1.40, HM Government: Budget 2016: policy costings, page 33 and HMRC: Oil and gas taxation: reduction in Petroleum Revenue Tax and supplementary charge.)

The Finance Bill 2016 will, for expenditure incurred on and after 16 March 2016, prevent the generation of:

These measures aim to protect the Exchequer by ensuring that the allowances work as intended.

(See HM Treasury: Budget 2016, paragraph 2.135, Overview, paragraph 1.39 and HMRC: Oil and gas taxation: minor amendments to onshore, cluster area and investment allowances.)

As part of the 2016 Budget, HMRC announced that if a person disposes of a licence interest but agrees to retain some or all of the decommissioning liability for any plant and machinery transferred:

For more information about decommissioning, see Practice note, Oil and gas taxation: Decommissioning.

(See HM Treasury: Budget 2016, paragraph 1.195, HM Treasury: Business tax road map, paragraph 2.17 to 2.18, Overview, paragraph 2.27 and HMRC: Oil and Gas companies: tax relief for decommissioning expenditure: technical note.)

To encourage investment in unlisted trading companies, the government has announced that ER will be available to individuals who subscribe for new shares in such companies on or after 17 March 2016 and hold those shares for at least three years from 6 April 2016.

Since the introduction of ER, the qualifying criteria (other than for shares acquired on exercise of an Enterprise Management Scheme option) have been a 5% holding and the status of employee of officer of the company for a period of 12 months ending on the date of disposal. This change broadens the scope of the relief, giving long-term investors the opportunity to benefit from a tax rate of 10% on gains up to a lifetime limit of £10 million. This is a separate lifetime allowance, so that any gains on which the individual has claimed or will claim ER under the existing ER rules will not be taken into account.

(See Policy paper: Capital Gains Tax: Entrepreneurs' relief: extension to long-term investors, HM Treasury: Budget 2016, paragraphs 1.27, 1.172 and 2.188, Overview, paragraph 2.1.50 and HM Treasury: Business tax road map, paragraph 2.23).

In the first of three sets of amendments to the rules introduced by the Finance Act 2015 (FA 2015), changes backdated to 18 March 2015 will partially reverse some of the amendments to the definitions of trading company and introduced by the FA 2015 which denied entrepreneurs' relief (ER) to employees who held shares in a company that held shares in a joint venture company (JVC) but did not have a trade of its own. Relief was similarly denied by FA 2015 to shareholders in a company that was a member of a trading partnership.

For most tax purposes, members of a JVC are treated as carrying on their proportionate share of the trade of the JVC. The FA 2015 changes, which were introduced to counter perceived tax avoidance, amended the definitions of "trading company" and "trading group" to disregard participation in a JVC as a trading activity. In the 2015 Autumn Statement, the government announced that it was looking again at the measures as it had been alerted to the fact that commercial structures were being caught unfairly.

The amendments to be introduced by the Finance Bill 2016 will make the availability of relief dependent upon the size of the individual's shareholding in a company and the size of that company's shareholding in a JVC. To qualify for ER, the individual must be entitled, directly or indirectly, to a minimum 5% share in the trading JVC. An individual who holds 20% of the shares in a company which owns 40% of a JVC will indirectly own 8% of the JVC and will therefore qualify for relief.

This amendment is welcomed, but whether it goes far enough to prevent all commercial arrangements from being caught remains to be seen.

For information on ER, see Practice note, Entrepreneurs' relief.

(See HMRC: Capital Gains Tax: Entrepreneurs' Relief - changes to the treatment of joint ventures and partnerships, Overview, paragraph 1.49 and HM Treasury: Budget 2016, paragraph 2.192.)

Individuals who are reducing their participation in a family company or partnership and, at the same time selling to a family member a privately-owned asset that has been used in the business, will not be prevented from claiming ER on the associated disposal. The proposed change will be backdated to 18 March 2015 so that the changes introduced by FA 2015 will not prejudice genuine retirements from a family business.

ER is available on an associated disposal where a partner is disposing of at least a 5% share of the partnership or 5% of the shares in a family company of which he is a director or employee. FA 2015 changes denied relief if the disposal of the share in the partnership or shares in the company was to a family member (see Practice note, Entrepreneurs' relief). Finance Bill 2016 amendments will remove the anomaly and will also allow relief where the individual is retiring completely and the shareholding or partnership share disposed of is not 5% but represents what remains of a previously qualifying holding.

The government has listened to feedback from taxpayers and professional bodies on the unfairness of the FA 2015 measure and has acted accordingly.

(See HMRC: Capital Gains Tax: changes to rules to extend availability of Entrepreneurs' Relief on associated disposals, Overview, paragraph 1.49 and HM Treasury: Budget 2016, paragraph 2.189.)

On the incorporation of a business, entrepreneurs' relief will be allowed to a former partner in relation to the goodwill if he receives less than 5% of the shares and voting rights in the new company. Relief will also be due if the transfer of the business is part of arrangements for the company to be sold to a new independent owner. The change will be backdated to 3 December 2014, the date on which the current version of the legislation took effect.

For information on the current restrictions on claims for ER on incorporation, see Entrepreneurs' relief: Incorporation of a sole tradership or partnership.

(See HMRC: Capital Gains Tax: changes to rules to extend availability of Entrepreneurs' Relief on goodwill on incorporation , HM Treasury: Budget 2016, paragraph 2.190 and Overview, paragraph 1.48.)

From April 2017, there will be two new allowances that will exempt from tax the first £1000 of an individual's trading and property incomes. Where an individual's trading or property income falls beneath the threshold, there will be no requirement to declare the income for tax purposes. Individuals whose trading or property income exceeds the allowance will be able to elect whether to deduct expenses in the normal way or, in the alternative, to claim the relevant allowance.

The legislation will be in the Finance Bill 2017.

(See HM Treasury: Budget 2016, paragraphs 1.170 and 2.25, Overview, paragraph 2.14 and HM Treasury: Business tax road map, paragraph 2.25.)

Legislation will be introduced in the Finance Bill 2016 to ensure that certain changes made to the EIS and VCT legislation by the Finance (No. 2) Act 2015 work as intended. The Finance (No. 2) Act 2015 introduced a raft of changes including a new maximum age condition and the concept of a "knowledge intensive company", which must satisfy an operating costs condition (among other things). The conditions are tested over a five year (maximum age condition) or three year (knowledge intensive company operating costs condition) period. For discussion, see Practice note, Enterprise Investment Scheme (EIS): Maximum age limit and Knowledge-intensive companies, and Practice note, Venture Capital Trusts: Maximum age limit and Knowledge-intensive companies.

The Finance Bill 2016 amendments will ensure that the relevant periods end immediately before the beginning of the company's last accounts filing period unless the end of that period falls more than 12 months before the date on which the investment is made. In that case, the periods will end 12 months before the date on which the investment is made. This measure will take effect for shares issued or investments made on or after 18 November 2015 unless an election is made for the existing legislation to apply, in which case the measure will take effect for shares issued or investment made on or after 6 April 2016.

The Finance Bill 2016 will also amend the VCT approval conditions (as to which, see Practice note, Venture Capital Trusts: Conditions for approval of VCTs) to introduce a new condition specifying the non-qualifying investments that a VCT may make. This measure will take effect from 6 April 2016.

The government also confirmed its 2015 Autumn Statement announcement that all remaining energy generation activities will become excluded activities for the purposes of the venture capital schemes (EIS, VCT, and SEIS) with effect from 6 April 2016.

(See HMRC: Income Tax: Enterprise Investment Scheme and Venture Capital Trusts, Overview, paragraph 1.24 and HM Treasury: Budget 2016, paragraphs 2.46 and 2.47.)

The government has announced that it will abolish Class 2 NICs with effect from 6 April 2018. This follows a consultation, on which the government will publish its responses shortly, that was based on recommendations from the Office of Tax Simplification. The government will set out details of how the self-employed will access contributory benefits when Class 2 NICs are abolished.

At present, self-employed individuals pay both fixed rate Class 2 contributions and Class 4 contributions that are based on their business profits. (For developments to date, see Tax legislation tracker: owner-managed business: Abolition of Class 2 NICs and reform of Class 4 NICs.)

(See HM Treasury: Budget 2016, paragraphs 1.166, 1.167, 2.23, Overview, paragraph 2.65, HM Treasury: Business tax road map, paragraph 2.24 and HM Government: Budget 2016: policy costings, page 31.)

Following the Office of Tax Simplification (OTS) review of the taxation of small companies (see Legal update, OTS small company taxation review), the government has announced that it will now ask the OTS to:

Terms of reference for the OTS's work on NICs and corporation tax will be published shortly. The government will respond in due course to the recent OTS report on closer alignment of income tax and NICs.

(See HM Treasury: Budget 2016, paragraphs 1.188, 2.214 and 2.215, Overview, paragraphs 2.32, 2.63 and 2.64 and HM Treasury: Business tax road map, paragraph 2.27.)

The government will consult on the tax treatment of partnerships, including how partnerships calculate their tax liabilities. This follows on from the Office of Tax Simplification's review into partnership taxation, which highlighted uncertainties in the rules (see Practice note, Partnerships: tax: Simplification of partnership taxation). Any legislation will be included in a future Finance Bill.

(See HM Treasury: Budget 2016, paragraph 2.109 and Overview, paragraph 2.13.)

HM Treasury published a summary of responses to its consultation on pensions tax relief. The Chancellor of the Exchequer stated in his main Budget speech that, after consulting widely, it was "clear there was no consensus" on the issue. As a result, no changes will be made to the pensions tax relief rules; instead, the ISA rules will be expanded, see ISA allowance and Lifetime ISA.

For more detail on this and other pensions announcements, see Legal update, March 2016 Budget: key pensions announcements.

Following the publication on 14 March 2016 of HM Treasury's and the FCA's final report on the financial advice market review (see Legal update, FAMR final report), the government will:

(See HM Treasury: Budget 2016, paragraph 1.115 and 2.34, HM Government: Budget 2016: policy costings, page 11 and Overview, paragraphs 2.7 and 2.8.)

The higher rate of CGT will reduce from 28% to 20% and the basic rate of CGT will reduce from 18% to 10%, both with effect for disposals on or after 6 April 2016. However, the existing rates will continue to apply to carried interest and to chargeable gains on residential property that do not qualify for the principal private residence exemption. Specific provisions will set out how to calculate the chargeable gain on disposals of mixed-used properties. The rate of CGT on ATED-related gains will remain at 28% (see Practice note, Capital gains tax charge relating to annual tax on enveloped dwellings (ATED)).

The changes are intended to incentivise investment and to ensure that the UK remains a competitive environment for entrepreneurial activity.

For information on CGT, see Practice note, Tax on chargeable gains: general principles.

(See HM Treasury: Budget 2016, paragraphs 1.171 and 2.187, HM Treasury: Business tax road map, paragraphs 2.21 to 2.22 , Overview, paragraph 1.46 and HMRC: Changes to Capital Gains Tax rates.)

From 6 April 2017, the personal income tax allowance will increase to £11,500 and the basic rate limit will increase to £33,500 raising the higher rate threshold to £45,000 in 2017-18. The NICs upper earnings and upper profits limits, which are aligned with the higher rate threshold, will also increase.

For information on income tax rates and allowances, see Practice note, Tax rates and limits: Income tax. For information on NICs, see Practice note, Taxation of employees: National insurance contributions.

(See HMRC: Income tax: personal allowance and basic rate limit for 2017 to 2018, HM Treasury: Budget 2016, paragraphs 1.82 to 1.85, Overview, paragraph 1.1 and HM Government: Budget 2016: policy costings, page 8.)

The government has confirmed that it will introduce a personal savings allowance (PSA) of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers from 6 April 2016.

HMRC states that the draft clause published on 9 December 2015 has been amended following consultation to clarify:

The amended clause has not been published, but the Finance Bill 2016 will be published on 24 March 2016.

For more information and to follow future developments, see Private client tax legislation tracker 2015-16: Income tax: personal savings allowance.

(See HM Treasury: Budget 2016, paragraph 2.58 and Overview, paragraph 1.2 and page 22.)

The government has confirmed a number of reforms to the taxation of non-UK domiciled individuals from April 2017, including changes to the deemed domicile rules and charging inheritance tax on UK residential property held indirectly.

The Budget document also announces that:

For information about previous announcements and the current rules, and to follow future developments, see Private client tax legislation tracker 2015-16: Permanent non-domiciled tax status abolished and IHT: UK residential property owned indirectly.

(See HM Treasury: Budget 2016, paragraph 2.44 and Overview, paragraph 2.1.)

The Budget announces that, from 6 April 2017:

Adults under 40 will be able to open a Lifetime ISA. The government will add a 25% bonus to contributions of up to £4,000 each year before the ISA holder reaches 50. Therefore, the maximum amount of contributions attracting a bonus will be £128,000 and the maximum bonus £32,000 (plus investment growth as the bonus is paid each year). Additional contributions can be made without a bonus (subject to the overall annual subscription limit).

Funds can be withdrawn after the ISA has been open for at least a year. To benefit from the bonus, they must be used to buy the ISA holder's first home, or withdrawn when the holder is at least 60 or has been diagnosed with terminal ill health. A first home must be in the UK with a value up to £450,000. Two or more buyers can each use their own Lifetime ISA with bonus when buying together. The detailed rules will be based on Help to Buy (HTB) ISAs.

If funds are withdrawn in any other circumstances, the ISA holder will lose the government bonus and pay a 5% charge. However, the government will consider whether to allow withdrawals including the bonus for other specific life events and whether to allow borrowing against the ISA without a charge if the borrowed funds are fully repaid (along the lines of some US retirement plans).

As for other ISAs, a Lifetime ISA will be subject to inheritance tax on the holder's death and a surviving spouse or civil partner's Lifetime ISA allowance will be increased by the amount of the deceased holder's ISA at death.

Qualifying investments for Lifetime ISAs will be the same as for cash or stocks and shares ISAs. The overall annual subscription limit of £20,000 will apply to an individual's total contributions to cash ISAs, stocks and shares ISAs, Lifetime ISAs and Innovative Finance ISAs.

During the tax year 2017-18 only, a person who already has an HTB ISA will be able to transfer the funds to a Lifetime ISA without funds contributed before 6 April 2017 counting towards the Lifetime ISA limit. Subject to this, individuals can have an HTB ISA in addition to other types of ISA. However, a saver who holds both an HTB ISA and a Lifetime ISA can only benefit from the government bonus on one of them when buying a first property. If they take the bonus on the HTB ISA, they will also pay a charge on withdrawal from the Lifetime ISA (unless they have reached 60 or are terminally ill). HTB ISAs will remain available for new savers until 30 November 2019, as planned, and contributions can be made until 2029.

The government will bring forward legislation to implement the Lifetime ISA in autumn 2016 after discussions with the industry.

The Lifetime ISA is intended to be a simple product that harnesses the popularity of ISAs to address the issue of young people not saving enough, which is partly because they currently have to choose between saving for their first home and saving for retirement. It is also designed to allow more flexible retirement saving for the self-employed. Although the government has backed down from radical pension reforms for now, the suspicion must be that it is testing the water.

For more information about the current rules and previous announcements, see Tax data: individual savings accounts and Private client tax legislation tracker 2015-16: ISAs: flexibility and new ISA types.

(See HM Treasury: Lifetime ISA - explained, HM Treasury: Design of the Lifetime ISA: technical note, HM Treasury: Budget 2016, paragraphs 1.104 to 1.112, 1.168 and 2.50, Overview, paragraph 2.15 and HM Government: Budget 2016: policy costings, page 9 and paragraphs B.15 and B.28.)

As announced in the 2015 Autumn Statement, and following consultation on a draft clause, the government has confirmed that the Finance Bill 2016 will include a measure to ensure that a tax charge is not applied to loans or advances made by close companies to charity trustees for charitable purposes. This will apply to qualifying loans or advances that are made on or after 25 November 2015.

For more information and to track the progress of this measure, see Private client tax legislation tracker 2015-16: Close company loans to participators: charities partial exemption.

(See HM Treasury: Budget 2016, paragraph 2.43.)

For all private client and charities announcements, see Legal update, 2016 Budget: key private client tax announcements.

With effect from 17 March 2016 (subject to transitional rules), the SDLT rates structure for sales of and grants of leases in, non-residential and mixed property will be changed. The effect of the changes will be that, for sales and grants of leases of such property, the same or less SDLT will be payable if the non-rental consideration is £1.05 million or less and, in the case of SDLT on rent, leasehold transactions with an NPV of up to £5 million will pay the same SDLT as under the current rate structure. However, for higher value transactions, the SDLT charge will increase. These measures will be included in the Finance Bill 2016, but be subject to a resolution under the Provisional Collection of Taxes Act 1968.

For sales, the new rates structure adopts the fairer "slice" system under which that part of the entire consideration falling within a particular band is taxed at the rate applicable to that band (the slice system already applies for rent consideration). This replaces the existing "slab" system under which SDLT is levied at a single rate on the chargeable consideration for the transaction. The new rates for sales and lease premiums (non-rent consideration) are as follows.

Additionally, paragraph 9A of Schedule 5 to the Finance Act 2003 will be repealed with effect from the same date. This means that the nil rate band will apply to all leases, including those with an annual rent of £1,000 or more.

A new 2% rate for rent consideration paid on the grant of a lease is introduced from 17 March 2016. The new rates for rent consideration are as follows.

Under transitional rules, these measures do not have effect in relation to a transaction if the buyer elects and either of the following apply:

The new rates structure gives rise to complications in relation to linked transactions (where a transaction taxed under the old rates structure may be linked with one taxed under the new structure) and for certain types of lease transactions. HMRC's guidance note addresses some of these situations.

For information on the existing SDLT rates structure, see Practice note, SDLT and stamp duty rates (for land).

(See HMRC: Stamp Duty Land Tax: reform of charging provisions for non-residential property, HMRC: Guidance: Stamp Duty Land Tax: reform of structure, rates and thresholds for non-residential land transactions, HM Treasury: Budget 2016, paragraphs 1.179 to 1.183 and 2.186, HM Treasury: Business tax road map, paragraphs 2.51 to 2.55, Overview, paragraph 1.58 and HM Government: Budget 2016: policy costings, pages 25 and 26.)

Higher rates of SDLT will apply to acquisitions of additional residential properties (such as second homes and buy-to-let properties) with an effective date on or after 1 April 2016. The higher rates will be 3% above the current SDLT rates for residential property, so that the following rates will apply on a progressive basis:

*If the chargeable consideration is less than £40,000, the additional 3% SDLT charge will not apply. However, if the chargeable consideration is £40,000 or more, the total amount (up to £125,000) will be chargeable at 3%.

This measure was first announced in the 2015 Autumn Statement and a consultation was launched on 28 December 2015 until 1 February 2016 (see Legal updates, 2015 Autumn Statement and Spending Review: key business tax announcements: Increased SDLT rates for second homes and buy-to-let properties and SDLT consultation on higher rates for additional residential properties.

Broadly, the increased SDLT rates will apply if the transaction is a higher rates transaction. A transaction entered into by an individual will be a "higher rates transaction" if any of the following conditions are satisfied:

A transaction entered into by a buyer that is not an individual will be a "higher rates transaction" if either:

A "major interest" for these purposes does not include leases that were originally granted for a period of seven years or less. A "dwelling" is a building (or part of a building) that is suitable for use as a single dwelling or in the process of being constructed or adapted for such use. It also includes the garden or grounds and any land that subsists for the benefit of the dwelling. HMRC's guidance states that transactions in a garden, grounds or such land will not be subject to the increased rates if the dwelling is not also acquired by the buyer. However, this is not clear from the legislation.

A dwelling will be a replacement of an individual's only or main residence if the buyer intends that dwelling to be their only or main residence and the buyer sold their previous only or main residence in a three-year period (increased from 18 months as proposed in the consultation) ending on the effective date of the purchase of the new dwelling, provided no other only or main residence is acquired in the interim period. In these circumstances the increased SDLT rates will not apply. For transactions with an effective date before 26 November 2015, this three-year period commences on the later of 25 November 2015 and the date of sale of the previous residence.

A dwelling may, at a later date, be a replacement of an individual's only or main residence if the buyer intends that dwelling to be their only or main residence and, within a three-year period (increased from 18 months as proposed in the consultation) beginning on the effective date of the purchase of the new dwelling, the buyer sells an existing only or main residence. In these circumstances, the increased SDLT rates will apply to the purchase of the new dwelling. However, the buyer may reclaim any overpaid SDLT once the existing only or main residence is sold.

For these purposes, spouses and civil partners will be treated as one unit, so that they are entitled to one main residence between them, unless they are separated in circumstances that are likely to be permanent. The government proposed in its consultation document that this treatment would apply until the parties were separated under a court order or by a formal deed of separation. However, following responses to the consultation, this has been amended so that it is in line with the capital gains tax treatment.

As proposed in the consultation, a transaction entered into by joint owners will be a higher rates transaction if the conditions set out above apply to any of the buyers. Persons who are beneficially entitled to property under a bare trust and beneficiaries of trusts who have a life interest or interest in possession in a residential property will be treated as the buyers, holders and sellers of dwellings (as appropriate).

Following responses to the consultation, the government has dropped the proposed exclusion from the increased rates for large scale investment by investment funds and corporates.

The draft legislation provides that the increased rates will not apply if an individual jointly owns an interest in a dwelling that was inherited in a three-year period ending on the effective date of the purchase of a new dwelling, provided that the individual's beneficial share in that interest does not exceed 50%.

The legislation will be included in the Finance Bill 2016 and will insert a new Schedule 4ZA into the Finance Act 2003.

The government has published guidance on the increased rates, with a series of examples and questions and answers detailing various scenarios. An online calculator that calculates the amount of SDLT due on a higher rates transaction is now also available on HMRC's website.

It is encouraging that the legislation has taken into account some of the responses to the consultation, in particular, concerns related to the increased SDLT rates applying to individuals who inherit a small share in a dwelling and to separated and divorcing couples. However, it is disappointing that the legislation provides for a pay now, reclaim later approach if a property chain breaks down. This is likely to cause difficulties for buyers who will need to find additional financing to pay the increased SDLT rate for the interim period, and could arguably affect those with lower incomes more than those with higher incomes who might have more easy access to additional cash.

We will be publishing a practice note on the increased rates in due course.

(See HMRC: Stamp Duty Land Tax: higher rates for purchases of additional residential properties, HMRC: Stamp Duty Land Tax: buying an additional residential property, HM Treasury: Consultation on higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties, HM Treasury: Budget 2016, paragraphs 1.125, 1.126 and 2.183, Overview, paragraph 1.59 and HM Government: Budget 2016: policy costings, page 42.)

Measures will be introduced, at the Report Stage of the Finance Bill 2016, to reset the basis on which non-UK resident persons without a UK permanent establishment (PE) are subject to tax on profits arising from trading in, or developing for sale, UK land. Fundamentally, the profits of a trade carried on by a company will be subject to corporation tax if the trade comprises dealing in UK land, or developing UK land with a view to disposing of it, irrespective of where the trade is carried on and whether the trade is carried on through a PE. There will also be equivalent changes for income tax.

There will be anti-avoidance rules to counter so-called fragmentation (that is, arrangements under which, broadly, the significant people functions associated with the development are performed by another non-UK resident service company and for which it is paid the majority of the profits realised on the sale of the property) and "disguised trading" (enveloping the property in an investment company, in order for the non-residents to avoid what would otherwise be a trading profit if there had been a sale of the land instead of the company). The legislation that is to be crafted will borrow its structure from the transactions in land rules (see Practice note, Tax clearances: transactions in land), with appropriate changes. The legislation will also include a targeted anti-avoidance rule that will take effect from 16 March 2016. It will apply in either of the following circumstances:

Protocols have been agreed with Guernsey, Isle of Man and Jersey, amending their treaties with the UK to support the introduction of this legislation.

The government has also stated that it will create a task force to focus on offshore property developers to improve taxpayer compliance. Comments on the issues discussed in the technical note are invited by 29 April 2016.

(See HMRC, Profits from Trading in and Developing UK Land, HMRC: Technical note: Profits from Trading in and Developing UK Land, HM Treasury: Budget 2016, paragraphs 1.213, 1.214, 2.94 and 2.95, Overview, paragraph 1.27 and HM Treasury: Business tax road map, paragraph 2.42).

The rules that restrict an individual landlord from claiming relief for mortgage interest payments when calculating the profits of a residential property business and instead allows the individual to claim a basic rate tax reduction against their tax liability will be amended by legislation to be contained in the Finance Bill 2016. The amendments will provide that:

The amendments will also ensure that beneficiaries of a deceased's estate will be entitled to the basic rate tax reduction.

The rules restricting relief for finance costs for landlords and introducing the basic rate tax reduction were introduced by the Finance (No. 2) Act 2015, following an announcement in the July 2015 Budget (see Tax legislation tracker: property, energy and environment: Restricting interest relief for buy-to-let landlords).

(See HMRC: Clarification to finance costs restriction for landlords, HM Treasury: Budget 2016, paragraph 2.27 and Overview, paragraph 1.22 and Annex A (at page 78).)

The Finance Bill 2016 will repeal the wear and tear allowance and replace it with a new relief allowing landlords to deduct the actual costs of replacing furniture, furnishings, appliances and kitchenware in a let dwelling when calculating their tax liability.

This measure was first announced in the July 2015 Budget (see Tax legislation tracker: property, energy and environment: Replacement of wear and tear allowance).

The new relief will apply to expenditure incurred on or after 1 April 2016 for corporation taxpayers and 6 April 2016 for income taxpayers. The relief will apply to expenditure incurred on an item that is substantially the same as the item being replaced and on costs incurring in disposing of, or less any proceeds received for, the item being replaced.

The government has announced that, following technical consultation, the draft legislation will be amended so that:

(See HM Treasury: Budget 2016, paragraph 2.28 and Overview, paragraph 1.23.)

The renewals allowance for expenditure on the replacement and alteration of tools (for example, implements, utensils and articles used in a business) by traders and property businesses will be abolished for expenditure incurred on or after 1 April 2016 for corporation taxpayers or 6 April 2016 for income taxpayers.

The policy is introduced in response to allowance claims by some businesses on large and expensive equipment that was not intended to benefit from the renewals allowance. From April 2016, businesses may be able to claim capital allowances (see Practice note, Capital allowances on property transactions) or the new relief for residential landlords incurring expenditure on replacing domestic items (see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: Property businesses: wear and tear allowance reform).

(See HMRC: Income and Corporation Tax: repeal of the renewals allowance, HM Treasury: Budget 2016, paragraph 2.103, Overview, paragraph 1.21 and page 75 and HM Government: Budget 2016: policy costings, page 43.)

The government has confirmed that the business premises renovation allowance (BPRA) will expire on 31 March 2017 for corporation tax and 5 April 2017 for income tax, as legislated in the Finance Act 2012. BPRA will not be extended after those dates.

For information about BPRA, see Practice note, Capital allowances on property transactions: Business premises renovation allowances.

(See HM Treasury: Budget 2016, paragraph 2.91 and Overview, paragraph 2.12.)

The government has confirmed that the Finance Bill 2016 will include a relief from the 15% rate of SDLT for equity release schemes (home reversion plans) and will expand existing reliefs to include certain property development activities and employee occupation not currently covered. These measures were originally announced in the 2015 Autumn Statement (see Legal updates, 2015 Autumn Statement and Spending Review: key business tax announcements: 15% SDLT charge: extension of reliefs and Draft Finance Bill 2016 legislation: key business tax measures: 15% SDLT charge: new and extended reliefs). Changes of a "minor technical nature" will be made to the draft measures previously published.

(See HM Treasury: Budget 2016, paragraph 2.185 and Overview, paragraph 1.61.)

The government has confirmed its 2015 Autumn Statement announcement that it will include in Finance Bill 2016 a relief from the annual tax on enveloped dwellings (ATED) for equity release schemes (home reversion plans) and will extend the reliefs available for property development and properties occupied by employees (see Legal update, 2015 Autumn Statement and Spending Review: key business tax announcements: ATED: extension of reliefs). These will apply for chargeable periods beginning on or after 1 April 2016. Some amendments are to be made to the draft legislation that was previously published (see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: ATED: new and extended reliefs), which are of a minor technical nature.

For more information on ATED, see Practice note, Annual tax on enveloped dwellings (ATED)).

(See HM Treasury: Budget 2016, paragraph 2.185 and Overview, paragraph 1.61.)

For all property and construction Budget announcements (including changes to business rates), see Legal update, 2016 Budget: key property announcements and Legal update, 2016 Budget: key construction announcements.

With effect from 1 April 2016, the VAT registration threshold will be increased to £83,000 (from £82,000) and the deregistration threshold will be increased to £81,000 (from £80,000). These changes will be effected by secondary legislation.

For information on VAT generally, see Practice note, Value added tax.

The government will also make corresponding increases to the thresholds for income tax self-assessment "three line accounts" and the income tax cash basis.

(See HMRC: VAT: revalorisation of registration and deregistration thresholds, The Value Added Tax (Increase of Registration Limits) Order 2016 (SI 2016/365), HM Treasury: Budget 2016, paragraphs 1.187 and 2.149, Overview, paragraph 2.37 and HM Government: Budget 2016: policy costings, page 77.)

The government has announced a package of measures designed to clamp down on VAT evasion by overseas businesses (without a UK establishment) selling goods into the UK through online marketplaces. The following measures will be included in the Finance Bill 2016 and take effect from Royal Assent:

The government has also launched a consultation as a precursor to the introduction of a fulfilment house (that is, a business providing services of storage, breaking bulk, unpacking, re-packing and arranging subsequent delivery to its clients' customers of goods imported from outside the EU and cleared for customs purposes) due diligence scheme. Essentially, the scheme will require fulfilment houses to meet specified standards, be registered and maintain accurate records. The consultation period will close on 30 June 2016. Draft legislation will be issued for consultation later this year for inclusion in the Finance Bill 2017. The scheme is expected to commence in 2018.

(See HMRC: VAT: representatives for overseas businesses and joint and several liability for online marketplaces and Guidance: VAT: overseas businesses and joint and several liability for online marketplaces, HMRC: Fulfilment House Due Diligence Scheme (consultation document), HM Treasury: Budget 2016, paragraphs 1.218 to 1.220 and 2.146 to 2.147, Overview, paragraphs 1.57 and 2.38 and HM Government: Budget 2016: policy costings, page 44.)

The standard rate of insurance premium tax (IPT) will increase by 0.5%, to 10%, for premiums received on or after 1 October 2016. The increased rate will not apply to premiums received between 1 October 2016 and 31 January 2017 where insurers operate a special accounting scheme.

The funds raised by the increase will be used to increase investment in flood defences.

For information on IPT, see Practice note, Insurance premium tax.

(See HMRC: Changes to Insurance Premium Tax: increase to standard rate, HM Treasury: Budget 2016, paragraphs 1.205 and 2.154, Overview, paragraph 1.62 and HM Government: Budget 2016: policy costings, page 59.)