Finance Act 2018

Publication Date:January 01, 2018
 
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Finance Act 2018

2018 Chapter 3

An Act to grant certain duties, to alter other duties, and to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance.

[15 March 2018]

Most Gracious Sovereign

WE, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty’s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

1 Direct taxes

PART 1

Direct taxes

Income tax and corporation tax: charge

Income tax and corporation tax: charge

S-1 Income tax charge for tax year 2018-19

1 Income tax charge for tax year 2018-19

Income tax is charged for the tax year 2018-19.

S-2 Corporation tax charge for financial year 2019

2 Corporation tax charge for financial year 2019

Corporation tax is charged for the financial year 2019.

Income tax: rates and allowances

Income tax: rates and allowances

S-3 Main rates of income tax for tax year 2018-19

3 Main rates of income tax for tax year 2018-19

For the tax year 2018-19 the main rates of income tax are as follows—

(a) the basic rate is 20%;

(b) the higher rate is 40%;

(c) the additional rate is 45%.

S-4 Default and savings rates of income tax for tax year 2018-19

4 Default and savings rates of income tax for tax year 2018-19

(1) For the tax year 2018-19 the default rates of income tax are as follows—

(a)

the default basic rate is 20%;

(b)

the default higher rate is 40%;

(c)

the default additional rate is 45%.

(2) For the tax year 2018-19 the savings rates of income tax are as follows—

(a)

the savings basic rate is 20%;

(b)

the savings higher rate is 40%;

(c)

the savings additional rate is 45%.

S-5 Starting rate limit for savings for tax year 2018-19

5 Starting rate limit for savings for tax year 2018-19

Section 21 of ITA 2007 (indexation) does not apply in relation to the starting rate limit for savings for the tax year 2018-19 (so that, under section 12(3) of ITA 2007 as amended by section 4 of FA 2017, that limit remains at £5000 for that tax year).

S-6 Transfer of tax allowance after death of spouse or civil partner

6 Transfer of tax allowance after death of spouse or civil partner

(1) Chapter 3A of Part 3 of ITA 2007 (transferable tax allowance) is amended as follows.

(2) Section 55B (tax reduction: entitlement) is amended in accordance with subsections (3) to (5).

(3) In subsection (2) (conditions for entitlement to tax reduction)—

(a)

for paragraph (a) (individual is spouse or civil partner of maker of election in force under section 55C) substitute—

“(a) the individual is the gaining party (see section 55C(1)(a)) in the case of an election under section 55C which is in force for the tax year,”, and

(b)

in paragraph (d), for “individual’s” substitute “relinquishing”.

(4) After subsection (5) insert—

“(5A) In this section “the relinquishing spouse or civil partner”, in relation to an election under section 55C, means the individual mentioned in section 55C(1)(a) by whom, or by whose personal representatives, the election is made.”

(5) In subsection (6) (reduced personal allowance for transferor)—

(a)

after “under subsection (1)” insert “by reference to an election under section 55C”, and

(b)

for “individual’s” substitute “relinquishing”.

(6) Section 55C (elections to reduce personal allowance) is amended in accordance with subsections (7) and (8).

(7) In subsection (1)(a) (individual may make election if married or in civil partnership)—

(a)

after “the same person” insert “(“the gaining party”)”, and

(b)

in sub-paragraph (ii), after “when the election is made” insert “or, where the election is made after the death of one or each of them, when they were last both living”.

(8) After subsection (4) insert—

“(5) The personal representatives of an individual may make any election for the purposes of section 55B that the individual (if living) might make in relation to—(a) the tax year in which the individual dies, or(b) an earlier tax year.”

(9) Section 55D (procedure for elections under section 55C) is amended in accordance with subsections (10) and (11).

(10) In subsection (3) (elections which are not automatically continued in force for subsequent years), after “is made after the end of the tax year to which it relates” insert “or is made after the death of either of the spouses or civil partners”.

(11) In subsection (4) (election may be withdrawn only by individual who made it), after “by whom the election was made” insert “; an election made by an individual’s personal representatives may not be withdrawn”.

(12) The amendments made by this section—

(a)

are to be treated as having come into force on 29 November 2017,

(b)

have effect in relation to elections made on or after that day, and

(c)

so have effect even where a relevant death occurred on or before that day.

Employment

Employment

S-7 Deductions from seafarers’ earnings

7 Deductions from seafarers’ earnings

In section 384 of ITEPA 2003 (which provides that Crown employees cannot be seafarers for the purposes of Chapter 6 of Part 5), in subsection (2) (meaning of Crown employment), before the “and” at the end of paragraph (a) insert—

“(aa) which is not employment in the Royal Fleet Auxiliary Service,”.

S-8 Exemption for armed forces’ accommodation allowances

8 Exemption for armed forces’ accommodation allowances

(1) In Chapter 8 of Part 4 of ITEPA 2003 (exemptions: special kinds of employees), after section 297C insert—

“ 297D. Armed forces: accommodation allowances(1) No liability to income tax arises in respect of payments of accommodation allowances to, or in respect of, a member of the armed forces of the Crown.(2) An “accommodation allowance” is an allowance—(a) payable out of the public revenue,(b) for, or towards, costs of accommodation, and(c) in respect of which any conditions specified in regulations made by the Treasury are met.(3) The provision that may be made by regulations under subsection (2)(c) includes provision framed by reference to a scheme (by whatever name called), or document, as it has effect from time to time.(4) Regulations under this section may make—(a) different provision for different cases, and(b) different provision for different areas.(5) Regulations under this section that do not increase any person’s liability to income tax may have effect in relation to times before they are made.”

(2) The amendment made by subsection (1) has effect in relation to payments on or after such date as may be specified in regulations made by the Treasury.

S-9 Benefits in kind: diesel cars

9 Benefits in kind: diesel cars

(1) Section 141 of ITEPA 2003 (benefits in kind: appropriate percentage for diesel cars) is amended as follows.

(2) For subsection (1) substitute—

“(1) This section applies to a diesel car first registered on or after 1 January 1998 but before 1 September 2017.

(1A) This section applies to a diesel car first registered on or after 1 September 2017 if it does not meet the Euro 6d emissions standard.”

(3) In subsection (2)—

(a)

in the words before step 1, for “such a” substitute “the”;

(b)

in paragraph (a) of step 3, for “3 percentage points” substitute “4 percentage points”.

(4) After subsection (2) insert—

“(2A) A vehicle meets the Euro 6d emissions standard only if it is first registered on the basis of an EC certificate of conformity which indicates that the exhaust emission level is Euro 6d (and it does not meet that standard if it is first registered on the basis of an EC certificate of conformity which indicates that that level is Euro 6d-TEMP).”

(5) In sections 139(7)(a) and 140(5)(a) of ITEPA 2003 (appropriate percentage), before “diesel” insert “certain”.

(6) The amendments made by this section have effect in relation to the tax year 2018-19 and subsequent tax years.

S-10 Termination payments: foreign service

10 Termination payments: foreign service

(1) Chapter 3 of Part 6 of ITEPA 2003 (payments, and other benefits, on termination of employment etc) is amended as follows.

(2) In section 413 (exception from charge on termination etc payment where employee’s work history includes sufficient foreign service), before subsection (1) insert—

“(A1) This section applies to a payment or other benefit if—(a) the payment or other benefit is within section 401(1)(a), and the employee or former employee is non-UK resident for the tax year in which the employment terminates, or(b) the payment or other benefit is within section 401(1)(b) or (c).”

(3) In section 414(1) (reduction of termination etc payment where foreign service insufficient for section 413 exception)—

(a)

before paragraph (a) insert—

“(za) either—

(i) the payment or other benefit is within section 401(1)(a), and the employee or former employee is non-UK resident for the tax year in which the employment terminates, or

(ii) the payment or other benefit is within section 401(1)(b) or (c),”, and

(b)

for paragraph (b) substitute—

“(b) section 413(1) does not except the payment or other benefit from the application of this Chapter.”

(4) After section 414A insert—

“ 414B. Exception in certain cases of foreign service as seafarer(1) This section applies to a payment or other benefit if—(a) the payment or other benefit is within section 401(1)(a), and(b) the employee or former employee is UK resident for the tax year in which the employment terminates.(2) This Chapter does not apply if the service of the employee or former employee in the employment in respect of which the payment or other benefit is received included foreign seafaring service comprising—(a) three-quarters or more...

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