The Bill is expected to be enacted by parliament before the Christmas recess.
"The corporate interest restriction rules and new rules to ‘modernise’ corporate losses are major changes to the corporate tax system, applying from 1 April 2017, yet five months after the rules began to take effect we are still waiting for final legislation to be enacted. This is a very unsatisfactory state of affairs," said Heather Self, a tax expert at Pinsent Masons, the law firm behind Out-Law.com
A first, substantially shortened version of the UK Finance Bill received Royal Assent on 27 April. The government withdrew most of the provisions of the Bill so that it could be passed before parliament was dissolved ahead of the general election. Most of the substantive provisions affecting corporate taxpayers were removed from the Bill, including the corporate interest restriction rules, reforms to the corporate loss relief rules and reform of the substantial shareholdings exemption. These provisions all took effect from 1 April 2017 despite the delay to the Bill.
Under the corporate interest tax deduction restriction, tax relief for interest and certain other financing costs is limited to the lower of 30% of tax-EBITDA (earnings before interest, tax, depreciation and amortisation) and the adjusted net group-interest expense of the group for the period. An alternative group ratio rule is intended to help groups with high external gearing for genuine commercial purposes. Groups with net interest expense of less than £2 million are not affected. A public infrastructure exemption (PIE) is designed to take infrastructure projects and certain real estate projects out of the restriction.
"At over 600 pages and with 72 clauses and 18 schedules, the Finance Bill illustrates how complex our tax system has become," Self said.
"With the disruptions which will be caused to the parliamentary calendar by the party conferences and the half term break – not to mention the distractions of the Brexit debates, it will be a struggle to get this Bill through parliament before the next Budget which is due sometime in November.," she said. "Will this complex legislation with far reaching implications for businesses really get the detailed scrutiny it requires?"
The new Finance Bill has also reduced the threshold for non-domicile status so that non-UK domiciles who have lived in the UK for more than 15 of the past 20 tax years will automatically be deemed UK-domiciled, even if they have maintained a domicile overseas. The previous threshold was 17 years.
People outside the threshold will now be deemed domiciled for income tax, capital gains tax and inheritance tax purposes, and will not be permitted to claim the remittance basis of taxation. Individuals born in the UK will also be prevented from claiming non-domicile status while they are living in the UK.
Non-domiciled taxpayers contributed £9.3 billion to the UK economy in 2014/15 through a combination of income tax, capital gains tax and National Insurance contributions (NICs).
The Bill confirms that new Disclosure of Tax Avoidance Scheme (DOTAS) rules applying to VAT and indirect taxes, including insurance premium tax, originally due to take effect from 1 September 2017, will now apply from 1 January 2018.
On Wednesday, MPs debated the 'ways and means' resolutions relating to the new Finance Bill. In the debate, financial secretary to the Treasury, Mel Stride, said that proposals relating to landfill tax would not be taken forward in the current Bill, but would appear in equivalent new legislation in 2018.
Stride also announced earlier this week that clauses for the Finance Bill 2018 will be published on 13 September. He said that, due to the transition to a November Budget, there would be fewer clauses than in recent years.
"The news that draft clauses for the Finance Bill 2018 will be published next week will, I am sure, have been met with dismay by businesses who are still grappling with the implications of the Bill published today," said Self.