Draft provisions for the next Finance Bill: the key changes

13 Sep 2017

Yesterday the Finance Bill 2017-2019 received its Second Reading and the Bill has now moved to the Committee Stage, which is due to conclude on 26 October 2017. The Bill will then return to the floor of the House of Commons for any further amendments to be considered and its Third Reading. As a comparison, in 2015 the Committee Stage of a finance bill concluded on 15 October, eventually receiving Royal Assent on 18 November.

In addition, HM Treasury has today published draft provisions for the next Finance Bill. These provisions, which are intended to come into effect from 6 April 2018, are designed to strengthen and supplement the existing anti-avoidance rules that relate to the taxation of income arising and gains accruing to offshore trusts. These provisions run to thirty pages and are complex but as an overview of the proposed changes:

  • From 6 April 2018 a UK resident settlor of an offshore trust may be taxed on gains which have been realised by the trustees when benefits are received by certain close relatives of the settlor (whether those relatives are UK resident or not). 
  • From 6 April 2018 payments from an offshore trust to a non-UK resident beneficiary will no longer "wash out" any stockpiled gains accrued in the trust (unless that beneficiary is a close relation of a UK resident settlor to whom the change above applies). 
  • Where a payment is made by an offshore trust to a non-UK resident beneficiary or a remittance basis user, and this is linked to a payment which is made subsequently and after 6 April 2018 to a UK resident who is not a remittance basis user, then that ultimate recipient may be charged tax on gains realised by the trustees. 
  • Where a payment has been received by a UK resident beneficiary but the beneficiary becomes non-UK resident before any gains have arisen, then future gains will not be matched to that benefit, leaving them available to be taxed on UK residents.

  • From 6 April 2018 similar changes will be made to the income tax provisions meaning settlors will be taxed when benefits are received by them or close family members and payments which pass through non-UK residents to UK residents may also be taxed.

Finally, HM Treasury has announced today that the date for the next Budget will be Wednesday 22 November 2017. This means that it is very likely that the Bill introducing the provisions published in draft today will be published in December.

There are various planning options available to mitigate the impact of these changes. If you believe that any may affect you, your family or your interests please contact a member of our Tax and Estate Planning team.

Additional information