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This analysis is part of the Lexis®PSL Tax team’s summary of the Autumn Budget 2017. Some of the links require a LexisPSL subscription. If you are not a subscriber, you can take a free trial here.
Stamp duty and SDRT– 1.5% charge on the issue of shares
The government has helpfully confirmed that it will not seek to apply the stamp duty and SDRT 1.5% charge on the issue of shares (and transfers integral to capital raising) into overseas clearance services and depositary receipt issuers once the UK has exited from the EU.
FA 1986 contains provisions that apply a 1.5% charge in these circumstances, but case law (and HMRC practice that aims to comply with EU law) have restricted the scope of these provisions (see Practice Note: Higher rate SDRT and stamp duty charges).
See: Autumn Budget 2017 (para 3.39) and OOTLAR (para 2.65).
Corporate interest restriction
Some technical amendments are being made to the corporate interest restriction rules (CIR) that were brought in by Finance (No 2) Act 2017 (see Practice Note: Corporate interest restriction). The changes result from discussions with business and aim to ensure that the restriction regime works as intended. Some of the changes will take effect retrospectively from 1 April 2017 (in line with the main rules), and others from 1 January 2018.
FB 2018 and FB 2019 will make amendments to:
See: OOTLAR (para 1.20) and TIIN: Corporation Tax: amendments to the corporate interest restriction rules.
Hybrid mismatch rules
FB 2018 will include legislation making minor amendments to the hybrid rules (see Practice Note: Hybrid and other mismatches and UK rules counteracting hybrid mismatch arrangements—table). The changes were identified as necessary following informal consultation with stakeholders and are not intended to make any changes to the scope of the regime but are meant to clarify when and how the rules apply and to ensure they operate as intended. The amendments will broadly do the following:
The changes relating to taxes charged at a nil rate and multinational companies take effect from 1 January 2018. The remaining changes apply from 1 January 2017, when the regime was introduced.
See: Autumn Budget 2017 (para 3.36), OOTLAR (para 1.22), and TIIN: Corporation Tax: amendments to the hybrid and other mismatches regime.
Withholding tax exemption for debt traded on a multilateral trading facility
As announced at Spring Budget 2017, and following consultation, provisions in FB 2018 will remove the requirement to withhold tax on interest payments where debt is traded on a multilateral trading facility (MTF) that is operated by an EEA-regulated recognised stock exchange (see Practice Note: Exemptions and reliefs from UK withholding tax on yearly interest).
Following the consultation, it was also decided to widen the definition of alternative finance investment bonds (AFIBs) (which are Shari’a-compliant financial instruments, also known as ‘sukuk’) to include securities which are admitted to trading on such an MTF so that these will also fall within the rules that treat AFIBs as debt, and the return on them as interest, and qualify for exemption from withholding.
Draft provisions for inclusion in FB 2018 were published on 13 September 2017, along with explanatory notes and a TIIN, and these remain unchanged.
The changes are intended to remove a barrier to the development of UK debt markets and will apply to interest payments made on or after 1 April 2018. The amendments in relation to AFIBs will have effect for corporation tax purposes in relation to accounting periods beginning on or after 1 April 2018 and, for income and CGT purposes, from 6 April 2018.
See: OOTLAR (para 1.25) and draft legislation, explanatory notes and TIIN: debt traded on a multilateral trading facility (13 September 2017).
Bank levy re-scope
As announced at Summer Budget 2015, and following a subsequent consultation, draft FB 2018 clauses changing the scope and administration of the bank levy were published on 13 September 2017 (see News Analysis: Draft legislation for FB 2018—Bank levy). The changes:
The government announced that the draft legislation has been changed to include a number of technical changes to the bank levy calculation. We expect these changes to be published as part of the publication of the FB 2018 on 1 December 2017.
See: OOTLAR (para 1.27).
Stamp duty and SDRT– financial institutions bail-in exemption
FB 2019 will contain provisions that exempt certain transfers of shares from failing financial institutions to public bodies and creditors from stamp duty and SDRT. The exemption will be limited to the temporary transfer of shares to a bridge entity and the transfer of shares in exchange for temporary certificates issued to creditors that identify their entitlement to the shares under the UK special resolution regime for managing failing financial institutions. Similar provisions will apply to SDLT.
See: Autumn Budget 2017 (para 3.38) and OOTLAR (para 2.64).
LexisPSL subscribers can access all analysis and insight on the Autumn Budget 2017. If you are not a subscriber, you can take a free trial here.
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