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Tax expert: rush to enact 2015 Finance Bill leaves no time for proper parliamentary scrutiny


The UK government's rush to enact this year's Finance Bill before parliament is dissolved on 30 March leaves no time for proper scrutiny of some complex new tax rules, an expert has said.

The 2015 Finance Bill, which is 337 pages long, was published on 24 March and is scheduled to be debated in parliament for a single day. It includes a new diverted profits tax (DPT) designed to prevent avoidance by multinational companies and a new anti-avoidance measure on corporate tax losses, which will apply to profits from 18 March. However, it does not include a planned new 'corporate rescue exemption' to provide tax relief on UK debt restructurings.

DPT is due to come into force on 1 April. Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that although there had been some "welcome changes" to the tax since first announced at the 2014 Autumn Statement, lack of parliamentary scrutiny remained a concern.

"Although draft Finance Bill clauses were published in December 2014 for most measures, it is highly unusual for them to be enacted in a pre-election period without proper debate," she said.

"Although there are some welcome changes to the DPT rules, I am extremely concerned that this highly complex legislation is being enacted in such a hurry with very little time available for proper scrutiny of the final provisions. With a projected yield in 2015/16 of only £25 million, it is hard to see why this measure could not be properly debated as part of a second Finance Bill later in the year," she said.

The 2015 Finance Bill will, once enacted, implement measures announced at the 2014 Budget, the 2015 Budget and the 2014 Autumn Statement. These include a package of fiscal support for the oil and gas industry, further increases to the annual banking levy and provisions restricting the ability of banks to offset previous losses against their profits and an increase to the annual allowance.

DPT will initially be taxed at 25% and will apply where a foreign company "exploits" the permanent establishment rules or where a UK company or a foreign company with a UK-taxable presence uses artificial transactions or entities that "lack economic substance" to obtain a tax advantage. The final Finance Bill provisions narrow the notification requirements set out in a consultation on the new tax on 10 December 2014. Companies will now only have to notify HMRC if there is a significant risk that a DPT charge would arise and where HMRC does not already know about the arrangements, within three months of the end of the relevant accounting period.

Tax expert Eloise Walker of Pinsent Masons said that the exclusion of the planned corporate rescue exemption from the Finance Bill would leave companies hoping to restructure in an "extremely difficult position". The planned new relief, which is supposed to have effect from 1 January, would be available to debtor companies on release from a debt if it is reasonable to assume that there would be a material risk that at some point within the next 12 months the company would be unable to pay its debts without the release.

"This provision has been consulted upon for what seems like forever and would not appear to be controversial, so why is it not in the Finance Bill?" said Walker. "Measures clamping down on perceived avoidance such as the changes to the late paid interest rules have made it into the bill, but this entirely sensible measure to help companies in difficult to restructure without triggering tax charges has not. It seems as if priority has been given to revenue-raising measures at the expense of a measure designed to help companies in financial difficulty."

"Whether the measure makes it onto the statute book will now depend on what the new government decides to do. There is nothing to indicate that any of the political parties would not enact the provision but in the world of politics and coalitions, who knows?" she said.

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