Legislation to extend the freeze on the inheritance tax nil rate band of £325,000 for a further three years from 2015-16 up to and including 2017-18. The legislation (to be introduced in Finance Bill 2014, according to the Overview) will have effect from the tax year 2015-16.

The measure forms part of the package to fund a cap on care costs for the elderly from April 2016 and was first announced by the Secretary of Health, Jeremy Hunt, on 11 February 2013, as to which, see Legal update, IHT nil rate band freeze extended to pay for social care proposals. To follow the progress of this measure, see Private client tax legislation tracker 2012-13: IHT: nil rate band.

(See TIIN, Inheritance tax: nil-rate band, Budget Report, paragraph 2.76 and Overview, paragraph 2.13.)

HMRC has announced that conditions and restrictions will be introduced in Finance Bill 2013 to limit the deduction of liabilities from a person's estate when calculating the value transferred on deaths and chargeable lifetime transfers occurring after Royal Assent. This measure is targeted at schemes creating artificial liabilities where the creditor is never repaid and loans to acquire assets that benefit from inheritance tax (IHT) reliefs (such as business property relief (BPR), agricultural property relief (APR) and woodlands relief) and property outside the scope of IHT (such as excluded property owned by non-UK domiciled individuals).

The measure will ensure that liabilities will only be deductible where the creditor is actually going to be repaid.

In most cases, loans made to acquire excluded property will no longer be allowed as a deduction. The deduction may be allowed where acquired property has been disposed of or where the liability is greater than the value of the excluded property so long as certain conditions are met.

Loans made to acquire BPR and APR assets will be treated as reducing the value of those assets so that the value of the reliefs will also be reduced. Where a liability exceeds the value of the relieved assets that excess will be allowed as a deduction against the estate as a whole although this will be subject to the restrictions to be introduced in relation to unpaid debts.

The new rules will also cover deductions for liabilities in relation to settled property although the restrictions on unpaid debts will not apply to the calculation of ten year charges.

Commercial debts and liabilities that are not repaid for a commercial reason will be unaffected.

Although this measure is targeted at specific schemes it could have a wider impact on vanilla IHT planning. For example, individuals wanting to liquidate corporate vehicles holding high value residential property in favour of direct ownership to avoid the extended scope of capital gains tax and the new annual fixed charge (ATED) have been considering the reduction of IHT exposure through associated debt. The proposed restrictions and conditions may make this harder.

For more information on the current rules relating to liabilities, see Practice note, Deceased's estate: how to value assets and liabilities of the estate for inheritance tax purposes: overview: What is a liability of the estate?.

(See TIIN, Inheritance tax: limiting the deduction for liabilities, Budget Report, paragraph 2.193 and Table 2.1 and Overview, paragraph 1.60.)

The capital gains tax (CGT) annual exempt amount for 2013-14 will be £10,900, increased from £10,600 in 2012-13. This is the first time that an annual increase has been calculated using the consumer prices index (CPI). The government has already announced that the amounts for the following two tax years will be increased by 1% (to £11,000 in 2014-15 and £11,100 in 2015-16) (see Private client tax legislation tracker 2012-13: CGT: annual exempt amount for 2014-15 and 2015-16).

For CGT rates and limits, see Practice note, Tax data: capital gains tax.

(See Budget Report, paragraph 2.70 and Table 2.2 and Capital Gains Tax (Annual Exempt Amount) Order 2013 (SI 2013/662).)

As anticipated, the Chancellor announced that the coalition government's plan to increase the personal allowance to £10,000 over the parliament will be accelerated. The personal allowance for those born after 5 April 1948 will increase (by £560) to £10,000 in 2014-15. At the same time, the basic rate limit will be reduced to £31,865, giving a higher rate threshold of £41,865. This figure reflects the increase of 1% in the higher rate threshold (tax-free amount plus basic rate band) that was announced in the 2012 Autumn Statement (see Legal update, 2012 Autumn Statement: business tax implications: Personal allowance increase to £9,440 from April 2013). For 2015-16, the personal allowance will increase in line with the Consumer Prices Index, while the higher rate threshold will increase by 1% to £42,285.

The Budget also confirms the rise in the personal income tax threshold from £8,105 to £9,440 with effect from 6 April 2013, with the basic rate limit being reduced to £32,010 (giving a higher rate threshold of £41,450).

(See TIIN, Income tax personal allowance for those born after 5 April 1948 and basic rate limit for 2014-15 and Budget Report, Executive Summary and paragraphs 1.164, 1.166, 1.171 and 2.34.)

The annual residential property tax (ARPT) is to be introduced from 1 April 2013 (see Legal updates, Annual residential property tax (ARPT): draft Finance Bill 2013 and Annual residential property tax (ARPT): draft Finance Bill 2013 amendments). Apart from confirming that the reliefs promised in the summary of responses to the consultation (see Legal update, Annual residential property tax (ARPT): draft Finance Bill 2013: Next steps) will be included in the Finance Bill 2013, it appears that the government is to call the tax, the annual tax on enveloped dwellings (ATED). ATED may better convey its target than ARPT (perhaps, this is being reserved for a future mansion tax), but seems rather colloquial for tax legislation.

No mention is made of the de minimis rules relating to fragmentation of interests, but it is understood these will be included in the Finance Bill 2013 (see, Ask, Where does the policy statement on ARPT aggregation and fragmentation come from?).

(See TIIN: Taxation of high-value UK residential property held by certain non-natural persons and Overview, paragraph 1.39.)

The draft legislation extending the charge to capital gains tax to resident and non-resident non-natural persons was published for consultation on 31 January 2013. The TIIN on this measure (together with details of amendments to the legislation on the related annual tax on enveloped dwellings (ATED) charge and 15% SDLT rate for high value residential property) does not indicate whether shortcomings in the draft legislation (specifically relating to the formula for calculating tapering relief for gains to prevent a cliff edge effect round the £2 million threshold and the anomalous measure on principal private residence relief for property owned by a trust) will be ironed out in the Finance Bill 2013 when it is published.

The TIIN gives details of reliefs that will apply to the charge to CGT as well as the related SDLT and ATED charges. As the draft CGT legislation is structured to bring into charge only non-natural persons that are liable to the ATED, presumably the changes to the relief provisions will be contained within the revised ATED provisions rather than the CGT legislation.

For details of the draft legislation published on 31 January 2013, see Legal update, ARPT-related CGT for non natural persons: draft Finance Bill 2013 clauses.

To follow progress of this measure see Private client tax legislation tracker 2012-13: CGT: disposals of enveloped residential property by non-residents.

(See TIIN, Taxation of high-value UK residential property held by certain non-natural persons and Overview, paragraph 1.41.)

The government has confirmed its intention to legislate in the Finance Bill 2013 on disguised interest and on withholding from interest on compensation payments, specialty debt and payments in kind (see Legal update, Draft Finance Bill 2013 legislation: key business tax measures: Disguised interest: income tax and Withholding from interest, and Tax legislation tracker: finance: Income tax rules on interest). As part of the 2013 Budget, the government has announced that, following consultation, the draft disguised interest rules have been revised to exclude certain types of share, subject to an anti-avoidance rule. Further details are currently unknown and will be clarified when the revised draft legislation is published.

(See Budget Report, paragraph 2.64 and Overview, paragraph 1.16.)

The Chancellor has announced draft legislation to close three loopholes reportedly being used by close companies to avoid the tax charge on loans to participators imposed by section 455 of the Corporation Tax Act 2010 (see Practice note, Loans to employees and directors: tax issues: Loans to participators: close company tax issues). The amendments will be published in Finance Bill 2013 on 28 March 2013, and will apply to all loans made on or after 20 March 2013.

The 2013 Budget also included a statement that the government will carry out a review of the close company loans to participators rules later in 2013.

For more information, see Legal update, 2013 Budget: close company loans to participators loopholes closed.

(See TIIN, Loans from close companies to their participators, HMRC, Technical note, Close company loans to participators, 20 March 2013, Budget Report, paragraph 2.194 and Overview, paragraphs 1.63 and 2.44).

The government has announced an extension to seed enterprise investment scheme (SEIS) reinvestment relief.

Currently, SEIS reinvestment relief provides an exemption from capital gains tax (CGT) for gains on disposals of any assets made in 2012-13 if a SEIS qualifying investment is also made in 2012-13. (For further detail, see Practice note, Seed Enterprise Investment Scheme (SEIS): Capital gains tax reinvestment relief). Legislation will be introduced in the Finance Bill 2013 to extend the exemption to gains accruing in 2013-14 provided they are re-invested in SEIS qualifying shares in 2013-14 or 2014-15. However, the exempt amount is half the qualifying re-invested amount.

(See TIIN, Seed Enterprise Investment Scheme: CGT re-investment relief and Budget Report, paragraphs 1.131, 2.68 and Table 2.1.)

The government has announced that legislation will be introduced in the Finance Bill 2013 to amend the seed enterprise investment scheme (SEIS) independence requirement. The amendment will have effect for shares issued on or after 6 April 2013.

The independence requirement is that the issuing company must not be a 51% subsidiary of another company or under the control of another company (or another company together with persons connected with that other company) at any time from the date of its incorporation to the three year anniversary date of the relevant share issue (section 257DG(2), ITA 2007). (This contrasts with the Enterprise Investment Scheme rules that apply the independence requirement from the date of issue of shares.) The SEIS independence requirement causes a problem for off-the-shelf companies because it is common for a corporate shareholder to hold the subscriber share, which means, for a period, the off-the-shelf company is controlled by another company. The amendment will ensure that such off-the-shelf companies are not disqualified provided that control exists only during a period where the company has issued only subscriber shares and has not yet begun, or begun preparations for, its trade or business.

For further details about SEIS, see Practice note, Seed Enterprise Investment Scheme (SEIS).

(See TIIN, Seed Enterprise Investment Scheme: eligible companies and Budget Report, paragraph 2.43.)

The Chancellor announced further details about the proposed new "employee shareholder" employment status, including:

For more detail, see Legal update, 2013 Budget: Tax treatment of employee shareholder shares.

(See TIIN, Employee shareholder status: capital gains tax exemption and income tax/NICs treatment, Budget Report, paragraph 1.133, 1.134. 2.46, 2.69, 2.71, Table 2.1 and 2.2 and Overview, paragraph 1.8.)

The government will provide £40 - 50 million annually from tax year 2014-15 to encourage uptake of employee ownership structures for businesses. This will fund:

The government will also consider further incentives in this area, including measures targeted at indirect employee ownership models.

(See Budget Report, paragraph 1.134.)

As announced in the 2012 Budget, capital gains tax entrepreneurs' relief will be available on disposals of shares acquired on exercise of EMI options (EMI option shares) from 6 April 2013, regardless of whether the option holder holds 5% of the shares in the company (as is usually required). The holding period of an EMI option will count towards the one year holding period required for shares to qualify for entrepreneurs' relief, as specified in a draft clause for the Finance Bill 2013 published in December 2012 (see Legal update, Draft Finance Bill 2013: enterprise management incentives (EMI) options and entrepreneurs' relief). The draft legislation has been revised so that the relief will also be available on the same basis for shares that replace EMI option shares on a company reorganisation, and for certain shares following an exchange of EMI option shares for shares in another company. Legislation to amend entrepreneurs' relief as it applies to EMI option shares will be included in the Finance Bill 2013, which is expected to be published on 28 March 2013.

(See Overview, paragraph 1.9.)

As announced at the 2012 Autumn Statement, the lifetime allowance will be reduced from £1.5 to £1.25 million and the annual allowance from £50,000 to £40,000 from 6 April 2014. Draft legislation for these measures, together with the proposed "fixed protection 2014" transitional relief, was published on 11 December 2012 (see Practice note, Finance Bill 2013: pensions provisions: Reductions in the annual and lifetime allowances and Transitional relief: fixed protection 2014).

The Budget confirms that in addition to fixed protection 2014, a form of personalised protection will be made available that will give individuals who claim it their own personalised lifetime allowance and allow them to make further pension accruals. Draft legislation for the personalised protection regime will be published in spring 2013 and be enacted in the Finance Bill 2014.

(TIIN, Reducing the pensions tax annual and lifetime allowances, Budget Report, paragraph 2.53 and 2.55 and Overview, paragraph 1.12.)

The maximum withdrawal permitted under a capped drawdown arrangement will rise from 100% to 120% of value of an equivalent annuity for new drawdown years starting after 26 March 2013. Following consultation, the legislation is to be amended to remove the requirement that the maximum drawdown pension should be recalculated after a pensioner with fixed protection transfers to another scheme.

The Budget Report also reveals the Treasury has commissioned a review of drawdown rates by the Government Actuary's Department, including the assumptions used, to ensure they reflect the annuity market.

(Budget Report, paragraph 2.60 and Overview, paragraph 1.13)

The Chancellor has carried out his 2012 Budget threat to counter, retrospectively, any new SDLT avoidance schemes (see 2012 Budget: key business tax announcements: SDLT: possible retrospective anti-avoidance legislation). Section 45 of the Finance Act 2003, which deals with the transfer of rights relief, will be amended by the Finance Act 2013. For more detail of this measure, see 2013 Budget: key business tax announcements: SDLT avoidance schemes retrospectively countered.

(See TIIN, Stamp duty land tax avoidance, Budget Report, paragraph 2.188, Overview, paragraph 1.43 and HMRC: Stamp duty land tax avoidance: retrospective changes to section 45 of the Finance Act 2003.)

As previously announced, the Finance Bill 2013 will include a number of reliefs which reduce the SDLT rate from 15% to 7% on acquisitions of high value residential property by non-natural persons. The reliefs will, broadly, match those where there is relief against the annual tax on enveloped dwellings (ATED). However, these SDLT reliefs will apply only if the property continues to satisfy the qualifying conditions throughout the following three years. Otherwise, clawback provisions will apply and additional SDLT will become payable.

For more information on the previous announcement, see Legal update, New reliefs from the 15% rate of SDLT: draft Finance Bill 2013.

For more on the ATED (formerly known as the annual residential property tax, ARPT), see Legal updates, Annual residential property tax (ARPT): draft Finance Bill 2013 amendments and Annual residential property tax (ARPT): draft Finance Bill 2013 amendments.

(See Budget Report, paragraph 2.186 and Table 2.1, and Overview, paragraph 1.40)

The government has announced that the draft Finance Bill 2013 measures re-writing the transfer of rights relief in section 45 of the Finance Act 2003 (see Legal update, SDLT transfer of rights: draft Finance Bill 2013), which were not a model of clear drafting, have been revised to improve their clarity and structure as well as addressing certain technical deficiencies.

For more information and to follow future developments, see Private client tax legislation tracker 2012-13: SDLT: sub-sale relief avoidance.

(See Overview, paragraph 1.42.)

The government has announced that it will consult on the abolition of stamp duty on shares quoted on growth markets such as the Alternative Investment Market (AIM) and the ISDX Growth Market. Legislation will be contained in the Finance Bill 2014.

(See Budget Report, Table 2.1 and Overview, paragraph 2.28.)

The government will introduce a £72,000 cap on reasonable care costs for older people from April 2016. The Secretary of State for Health, Jeremy Hunt, announced the government's intention to cap financial contributions towards the costs of care on 11 February 2013 and that the proposal would be funded in part by extending the freeze on the inheritance tax (IHT) nil rate band for a further three years from 2015-16. However, the cap announced at that time was £75,000 (see Legal update, IHT nil rate band freeze extended to pay for social care proposals). At the time of writing, it is not clear whether the cap has been lowered or there is an error in the 2013 Budget announcement and the TIIN outlining the freeze on the IHT nil rate band.

(See TIIN, Inheritance tax: nil-rate band and Budget Report, paragraph 1.195.)

The government will consult on the impact of withdrawing relief for interest on loans to purchase life annuities. Any legislation would be introduced in the Finance Bill 2014 and withdraw the relief for interest paid from 6 April 2019 or another future date.

This relief is a relic of mortgage interest at source (MIRAS), which was abolished in 1999. Grandfathering provisions currently allow relief on loans to purchase life annuities taken out before 9 March 1999 (sections 353 and 365, Income and Corporation Taxes Act 1988). The relief may apply to individuals who took out home income plans (a form of equity release) before that date. For more information, see Norfolk and Montagu on the Taxation of Interest and Debt Finance (Bloomsbury Professional, 2012), Chapter 8: Deduction of income tax from interest and information reporting: Mortgage interest relief at source (MIRAS) and Chapter 17: Life assurance for special purposes: B: Home Income Plans.

(See Budget Report, paragraph 2.58 and Overview, paragraph 2.11.)

As expected, the Finance Bill 2013 will include legislation introducing a statutory residence test for individuals (SRT), placing HMRC's concessionary split-year treatment on a statutory footing, and amending and extending anti-avoidance rules that tax temporary non-residents. These measures will take effect from 6 April 2013. Following consultation on its second draft of the legislation (published on 11 December 2012), the government has made amendments to the SRT concepts of full-time work and international transportation workers, as well as to the new rules on split-year treatment, although we will need to wait for publication of the Finance Bill on 28 March 2013 to see the details.

For more information on these measures, see Private client tax legislation tracker 2012-13: Statutory residence test and Practice note, Statutory residence test for individuals.

(See Budget Report, paragraph 2.48 and Overview, paragraph 1.3.)

The government is proceeding with its planned abolition of the concept of ordinary residence for tax purposes and the enactment of overseas workday relief (OWR). These measures will take effect from 6 April 2013. Following consultation on its second draft of the legislation (published on 11 December 2012), the government has amended the transitional rules for claiming OWR, although we will need to wait for publication of the Finance Bill on 28 March 2013 to see the details.

For more information on these measures, see Private client tax legislation tracker 2012-13: Abolition of ordinary residence.

(See Budget Report, paragraph 2.48 and Overview, paragraph 1.4.)

The draft legislation reforming the inheritance tax treatment of transfers between UK domiciled individuals and their non-UK domiciled spouses or civil partners is largely unchanged but the TIIN on the measures has been updated and replaces that published on 11 December 2012. From a comparison of both TIINs, the following appear to be amendments to the final legislation to be introduced in Finance Bill 2013:

To follow the progress of this measure, see Private client tax legislation tracker 2012-13: IHT: exemption for non-domiciled spouses.

(See TIIN, Inheritance tax: spouses and civil partners domiciled overseas, Budget Report, paragraph 2.77 and Overview, paragraph 1.69.)

The government has announced, but not published, changes to the draft Finance Bill 2013 legislation published on 11 December 2012 to amend anti-avoidance rules dealing with the transfer of assets abroad (Chapter 2, Part 13, Income Tax Act 2007) (TAA rules) and the attribution of chargeable gains realised by non-UK tax resident companies that are closely controlled by UK participators (section 13, Taxation of Chargeable Gains Act 1992) (section 13). The purpose of this legislation is to make both sets of rules compliant with EU law and clarify certain aspects of their operation.

The changes to the draft legislation amending the TAA rules are that:

The change to the draft legislation amending section 13 is that the new exemption for economically significant activities no longer requires activity to be carried on wholly outside the UK through a non-UK business establishment.

HMRC has published an amended TIIN on the TAA rules, replacing the TIIN published on 11 December 2012, but there is no new TIIN on section 13.

We will review the effect of the changes after the revised legislation is published in the draft Finance Bill on 28 March 2013. Without sight of the draft legislation it is not possible to assess whether it will now achieve EU compliance.

For the last version of the draft legislation and to follow further developments, see Private client tax legislation tracker 2012-13: Transfer of assets abroad and attribution of gains rules.

(See TIIN, Amendments to the transfer of assets abroad legislation, Budget Report, paragraph 2.195 and Table 2.1 and Overview, paragraph 1.15.)

The Chancellor announced in his Budget statement that the UK had reached agreements with the Isle of Man (IOM), Jersey and Guernsey to bring in over £1 billion of unpaid taxes as part of a package of tax avoidance and evasion measures, which includes HMRC's offshore evasion strategy (see HMRC publishes offshore evasion strategy).

The Budget documents include the text of a memorandum of understanding (MOU) with each of Jersey and Guernsey setting out the terms of a disclosure facility to run from 6 April 2013 to 30 September 2016. The MOUs are unsigned and undated. The terms of these facilities appear to be identical to those agreed with the Isle of Man (IOM) and published on 19 February 2013, except for the range of capped penalties. In the IOM facility, penalties are capped at 10% except for penalties relating to inaccuracies in documents under Schedule 24 to the Finance Act 2007, which range from 20% to 40%. In the Jersey and Guernsey facilities, the higher penalties may also apply in relation to failure to notify chargeability to tax under Schedule 41 to the Finance Act 2008 and late filing of tax returns under Schedule 55 to the Finance Act 2009. We suspect that the omission of these provision from the IOM facility may be an oversight and so may be rectified (for example, in a joint declaration).

The government has not yet published the automatic tax information exchange agreements that will accompany the three disclosure facilities, which it has previously announced would be along the lines of the agreement between the UK and the US to implement the Foreign Accounts Tax Compliance Act (FATCA). According to an action plan at the end of the offshore evasion strategy, automatic information exchange with both the US and the Crown Dependencies will begin in 2015. However, the plan may be inaccurate, as it also shows that the disclosure facilities will run from mid-2014 to the end of 2016 rather than on the dates above (which are the same in all three facilities).

The Guernsey government had already confirmed that it would enter into a package of this kind with the UK, but Jersey had only confirmed that it was consulting its financial institutions about the proposal. That consultation ended on 15 March, so this announcement is earlier than might have been expected.

For more background and further details of the tax packages agreed with each jurisdiction, see Private client tax legislation tracker 2012-13: FATCA-style agreements with other jurisdictions. For details of the IOM disclosure facility and links to information about the concurrent Liechtenstein disclosure facility and UK/Switzerland tax co-operation agreement, see Legal update, Isle of Man disclosure facility and tax information exchange agreement announced. For information about tax penalties, see Practice note, Tax penalties: consolidated regime for culpable penalties.

(See Budget Report, Executive Summary and paragraphs 1.206, 2.196 and Table 2.1, HMRC: No safe havens, Memorandum of Understanding between Jersey and HMRC and Memorandum of Understanding between Guernsey and HMRC.)

Finance Bill 2013 will contain primary legislation to implement international agreements to improve tax compliance. The government will also shortly issue regulations to implement the UK-US Foreign Account Tax Compliance Act (FATCA) agreement, signed on 12 September 2012 (see Legal update, UK and US sign agreement to implement FATCA). The government will publish an updated TIIN for (presumably) the primary legislation alongside the regulations. Further regulations will be introduced to implement subsequent similar automatic exchange agreements that the UK enters into.

The primary legislation was published in draft for comment in December 2012 (see Legal update, Draft Finance Bill 2013 legislation: key business tax measures: Implementing the UK-US FATCA agreement). Also in December 2012, HMRC published a summary of responses to its September 2012 consultation on implementing the UK-US FATCA agreement, draft regulations, draft guidance and FAQs on data protection aspects of the regime (see Legal update, Implementing the UK-US FATCA agreement: response document and draft regulations and guidance).

For more information about FATCA, see Practice note, A guide to PLC's FATCA resources.

(See Budget Report, paragraph 2.196 and Overview, paragraph 1.67.)

The government has confirmed its announcement in the 2012 Budget that Statement of Practice (SP) 1/09 is to be enacted in the Finance Bill 2013 and will take effect from 6 April 2013.

Draft legislation to enact SP 1/09 was published for consultation on 11 October 2012 (see Legal update, SP1/09: Consultation on legislation for internationally mobile employees' mixed fund concession). The draft legislation applies to certain non-UK domiciled employees carrying out employment duties both in the UK and overseas under a single contract of employment and provides for:

Revisions to the draft legislation were published for consultation on 11 February 2013 (see Legal update, SP1/09: Revised draft legislation and further consultation questions). However, a response document has not been published and no new or additional information provided.

We are tracking this measure at Private client tax legislation tracker 2012-13: Statement of Practice 1/09: apportionment of UK and overseas employment income.

(See TIIN, Statement of Practice 1/09, Budget Report, paragraph 2.49 and Overview, paragraph 1.5.)

Two statutory instruments will be introduced to amend the offshore funds regulations. The first, which takes effect from 3pm on 20 March 2013, clarifies that an offshore income gain cannot be avoided by a merger or reorganisation of the offshore fund. The second will introduce amendments ensuring that investors are taxed on the correct proportionate share of income of an offshore fund. (In relation to the taxation of offshore funds, see Practice note, Offshore funds: tax: Offshore funds legislation.)

The original offshore funds legislation was introduced to prevent income being rolled up offshore and effectively converted into chargeable gains. The regime was reformed and new legislation, which took effect from 1 December 2009, was introduced. Under the new regime, investors in offshore funds which are reporting funds are subject to capital gains tax on a disposal of their interest in the fund and are subject to income tax on their share of the annual reported income of the fund. Investors in offshore funds which are non-reporting funds are subject to income tax on a disposal of their interest in the fund.

The Offshore Funds (Tax) (Amendment) Regulations 2013 (SI 2013/661), which came into force at 3pm on 20 March 2013, introduce a new paragraph 3A into regulation 17 of the Offshore Funds (Tax) Regulations 2009 (SI 2009/3001). This paragraph provides that an investor will be subject to income tax on a disposal of an interest in a reporting fund if that interest was acquired in consequence of an arrangement to which section 135 or 136 of the Taxation of Chargeable Gains Act 1992 applied and the interest which they held prior to the exchange of securities or scheme of reconstruction was in a non-reporting fund.

Further regulations, which will contain additional amendments, will be published for comment shortly after 20 March 2013 and are expected to come into force by 30 June 2013. These regulations will:

(See TIIN, Amendments to the Offshore Funds (Tax) Regulations 2009, Budget Report, paragraph 2.123 and The Offshore Funds (Tax) (Amendment) Regulations 2013 (SI 2013/661).)

The Finance Bill 2013 will include income tax exemptions for non-UK resident competitors taking part in the London Anniversary Games in 2013 and the Glasgow Commonwealth Games in 2014. Draft legislation for the Glasgow 2014 exemption was published on 11 December 2012 (see Private client tax legislation tracker 2012-13: Glasgow Commonwealth Games: non-resident competitors). A similar exemption applied to competitors at the London 2012 Olympic and Paralympic Games (see Legal update, London Olympic Games and Paralympic Games Tax Regulations 2010 made).

(See TIIN, London Anniversary Games, TIIN, Glasgow Commonwealth Games, Budget Report, paragraph 2.40 and Overview, paragraphs 1.11 and 1.69)

The government has announced that, in spring 2013, it will publish a response to its July 2012 consultation on the simplification of inheritance tax charges in relevant property trusts. The response will cover detailed options for simplifying the way exit and ten year anniversary charges are calculated. Legislation to implement any changes will be included in Finance Bill 2014.

The initial consultation was criticised for its narrow scope. The response may take into account these views.

For information on the current rules for calculating exit and ten year anniversary charges in a relevant property trust, see Practice notes, Inheritance tax: relevant property trusts: calculating the charge to tax, Inheritance tax: relevant property trusts: key concepts, Inheritance tax: relevant property trusts, effect of death of settlor on calculation of tax and Inheritance tax: relevant property trusts: effect of APR and BPR on calculation of tax.

For information on the consultation see Private client tax legislation tracker 2012-13: IHT: simplifying calculations for relevant property trusts.

(See Budget Report, paragraph 2.75 and Overview, paragraph 2.14.)

The government's Budget Report states, in very brief terms, that the Finance Bill 2013 will introduce legislation to "treat for tax purposes assets held in trusts for vulnerable beneficiaries in a similar way as if held directly by the vulnerable person". This seems likely to be a reference to the draft Finance Bill 2013 clauses, published on 11 December 2012 and revised on 17 January 2013, which change the definition of a disabled person for tax purposes and harmonise the restrictions on capital and income distributions from trusts for vulnerable persons (see Legal update, Vulnerable beneficiary trusts: HMRC response to consultation and Finance Bill 2013 clauses). Although not mentioned in any of the Budget materials, we understand that, before it appears in the Finance Bill 2013, the government will be amending the draft legislation on vulnerable beneficiary trusts to:

We are tracking the measures on vulnerable beneficiary trusts at Private client tax legislation tracker 2012-13: Trusts for disabled and vulnerable persons.

(See Budget Report, paragraph 2.82.)

The 2012 Budget announced that measures will be introduced in Finance Bill 2013 for an annual charge on residential properties valued at more than £2 million held by certain "non-natural persons".

Following consultation on the draft legislation, various changes are to be made to the proposals. These include providing relief for residential properties owned by a charity and held for charitable purposes. For details of all the changes proposed, see 2013 Budget: key business tax announcements: Property: Changes to relief from the 15% SDLT rate.

(See TIIN, Taxation of high-value UK residential property held by certain non-natural persons, Budget Report, paragraph 2.185 and Overview, paragraph 1.39.)

As announced on 4 March 2013, the government has confirmed that powers will be introduced in Finance Bill 2013 to enable detailed eligibility rules for community amateur sports clubs (CASCs) to be set out in secondary legislation, see Legal update, Community Amateur Sports Clubs: government to consult on new eligibility rules. Regulations are to be laid before Parliament after the Finance Bill 2013 has received Royal Assent.

(See Budget Report, paragraph 2.79 and Overview, paragraph 1.38.)

The government will consult on proposals to make it easier to claim Gift Aid on donations made using a wide range of digital giving channels (such as online or by using mobiles and tablets). The consultation will include options for enabling donors to complete a single Gift Aid declaration to cover all their donations through a specific channel. If primary legislation is required to affect policy changes resulting from the consultation, measures will be introduced in Finance Bill 2014.

For details of the current rules on Gift Aid declarations, see Practice note, Gift Aid for individuals, sole traders and partnerships: overview: Donor must make a valid Gift Aid declaration.

(See Budget Report, paragraph 2.78 and Overview, paragraph 2.16.)

On 24 January 2013, the government launched a consultation on proposals to reform payroll giving, see Legal update, Government consults on Payroll Giving scheme reforms. The consultation closes on 19 April 2013. The government has confirmed that it will take forward any necessary changes to the payroll giving scheme in a future finance bill, as appropriate.

(See Overview, paragraph 2.17.)

From April 2014, an allowance of £2,000 per year will be introduced for all charities (and other businesses) to offset against their employer Class 1 National Insurance Contributions (NICs) bill. The government will engage with stakeholders on the implementation of the measure, with the aim of introducing legislation later in 2013.

For further details, see 2013 Budget: key developments relevant to share schemes: Tax treatment of employee shareholder shares.

(See Budget Report, paragraphs 1.128, 1.86 and 2.41 and Overview, paragraph 1.19.)

The government has announced that, in order to encourage volunteers to run events, it will improve the quality of its guidance and publish it in a single document on www.gov.uk. The government has acknowledged that confusing guidance has previously deterred volunteers and obstructed events that are valuable to local communities.

(see Budget Report, paragraph 2.240.)

The government has announced that it will consult by summer 2013 on the introduction of a new tax relief to encourage investment in social enterprises, with a view to introducing legislation in Finance Bill 2014.

For information about social enterprises, see Practice note, Social enterprises: legal structures.

(See Budget Report, paragraphs 1.135 and 2.45 and Overview, paragraph 2.7.)

The government has confirmed that the Finance Bill 2013 will include legislation introducing a general anti-abuse rule (GAAR). The GAAR will counteract tax advantages arising from abusive avoidance schemes subject to certain procedural requirements. Specifically, counteraction must first be notified by a designated HMRC officer. Unless, having considered any representations made by the taxpayer, a designated HMRC officer then decides that counteraction ought not to apply, the arrangements must be referred to an Advisory Panel for its opinion. Counteraction will be on a just and reasonable basis.

The GAAR will apply to income tax, NICs, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty land tax and the new annual tax on enveloped dwellings (previously known as the annual residential property tax) due to be enacted in the Finance Bill 2013. The legislation will apply to abusive tax arrangements entered into on or after the date of Royal Assent to the Finance Bill 2013. Separate legislation will be introduced later in 2013 to apply the GAAR to NICs.

The government first announced that it would consider introducing a legislative general anti-avoidance rule in the June 2010 Budget. This led to a study group and a series of consultations. Draft Finance Bill 2013 clauses were published in December 2012 (see Legal update, General anti-abuse rule (GAAR): response document, draft Finance Bill 2013 provisions and draft guidance).

(See TIIN, General anti-abuse rule, Budget Report, paragraph 1.211, 2.217 and Table 2.1 and Overview, paragraph 1.59.)

In the 2012 Autumn Statement, the government stated that it would consider reviewing the tax treatment of partnerships to combat avoidance activity in this area (see Legal update, 2012 Autumn Statement: business tax implications: Partnerships and avoidance).

Following this, as part of the 2013 Budget, the government announced that it will consult in spring 2013 on measures to:

The government aims to introduce legislation in this area in the Finance Bill 2014.

(In relation to the taxation of partnerships generally, see Practice notes, Partnerships: tax, Limited liability partnerships: tax and Limited partnerships: tax.)

(See Budget Report, paragraph 1.209 and Overview, paragraph 2.42.)

The government has confirmed that it will consult over summer 2013 on introducing a package of information and penalty powers specifically targeting the behaviour characteristic of high-risk promoters of tax avoidance schemes. The intention is to introduce legislation in the Finance Bill 2014. The measures could include publishing the details of such promoters.

The announcement does not state specifically that the forthcoming consultation relates to the DOTAS legislation. However, it is understood that this is the case. The government first announced that it intended to amend the DOTAS legislation in this respect in December 2012 (see Legal update, Draft Finance Bill 2013 legislation: key business tax measures: Disclosure of tax avoidance schemes: new powers). For more information on the DOTAS legislation, see Practice note, Disclosure of tax avoidance schemes under DOTAS: direct tax.

(See Budget Report, paragraph 1.211 and Overview, paragraph 2.43.)

The government has announced that it will consult on a proposal to introduce a penalties-based approach to taxpayers who have used avoidance schemes that have been defeated in court in litigation against another party. These taxpayers will be asked to acknowledge to HMRC that the judgment applies to them and amend their returns accordingly, or confirm that they stand by their original return. Penalties would be charged if the taxpayer failed to take reasonable care. The government intends that the measures will be included in the Finance Bill 2014.

For further information on the DOTAS regime, see Practice note, Disclosure of tax avoidance schemes under DOTAS: direct tax.

(See Budget Report, paragraph 2.224. and Overview, paragraph 2.45.)

HMRC has outlined its strategy for tackling offshore evasion in a document entitled No safe havens. The strategy has been developed by HMRC's new Offshore Evasion Strategy Team and its publication forms part of a package of measures originally announced in HMRC's 3 December 2012 report entitled Closing in on tax evasion (see Legal udpate, HM Treasury and HMRC outline approach to tackling tax evasion).

There are three main limbs to HMRC's strategy:

(See Budget Report, paragraph 2.197 and HMRC: No safe havens: Our offshore evasion strategy 2013 and beyond.)