Finance Bill 2017 should not be rushed through without scrutiny

The Chartered Institute of Taxation (CIOT) has written to Chancellor Philip Hammond urging him not to rush through a large number of tax changes, inlcuding Making Tax Digital, without any real parliamentary scrutiny, particularly since complex measures such as interest restriction have already faced repeated amendment

Following the announcement of a snap election on 8 June the timetable for Finance Bill 2017 will inevitably be truncated. Rather than the expected two days of House of Commons debate and 14 to 20 standing committee sessions, plus two days of report stage and third reading debate, precedent suggests that the committee and report stages will be compressed into a single day.

 At 762 pages the current Finance Bill is the longest on record.

CIOT is urging the government to drop the majority of the current Bill and keep only those measures essential to maintain the government’s revenue raising capacity, such as renewing the provision of income tax, and other measures which are required urgently, such as anti-avoidance provisions. Measures dropped could be reintroduced in a post-election Finance Bill where they can be scrutinised at greater length.

 In the letter, CIOT president Bill Dodwell urged the Chancellor not to rush substantial tax changes through parliament prior to the general election in less than seven weeks’ time.

‘We recognise the need to pass a basic Finance Bill before the election, containing those measures essential to the continuation of the tax system - primarily the renewal of income tax,’ said Dodwell. ‘This could also reasonably confirm changes to levels of duties announced on Budget day, and any other measures which are required urgently, such as anti-avoidance provisions.

‘Most other measures should be left until a post-election Finance Bill where they can be scrutinised at greater length.

‘This is not simply about the formality of parliamentary debate. Since the Finance Bill was published on 20 March, CIOT has identified a number of changes that we believe are needed to the legislation on areas including in complicated areas such as loss relief and interest deductibility.’

Two measures which will have an immediate impact on larger businesses, particularly multinationals, are the new rules on interest deductibility, running to 156 pages of draft legislation, and the over 100 pages of draft rules on relief for carried-forward losses for corporates. Both measures are extremely complex and still require substantial review before the final statute is put into place. The rules on interest restrictions have already ready been amended twice in the run-up to this Finance Bill, illustrating the complexity of the measures.

‘A truncated timetable - rushing through 762 pages of legislation in a single day or even two days next week – will not allow for adequate consideration of the matters we have raised.

‘A post-election Finance Bill would also enable more of the framework for Making Tax Digital to be put in statute, rather than brought in through regulations.

‘CIOT acknowledges improvements in the level of consultation on tax issues by the government over recent years. Our recent report, with the Institute for Government and the Institute for Fiscal Studies, on Tax Policy Making included recommendations for better scrutiny by parliament of new legislation.

‘We hope you will be able to reassure us that these general improvements on consultation will not be undermined by the rushing through of a huge Finance Bill without the chance of amendments and scrutiny in the final days of this parliament.’

The rushed Finance Bill could lead to more poor tax law while a change of government could have deeper implications for business.

James Hender, partner and head of the private wealth group at Saffery Champness, said: ‘Any significant delays come with the risk of further alterations – not least if we have a new government with a vastly different view of and approach to taxation.

‘For example, non domiciled individuals were at long last beginning to see light at the end of what has been a long drawn out and complex tunnel as their tax status was scrutinised and amended. Now, with a conclusion in sight and affairs begun to be set in order, we have further uncertainty about the final shape of the rules and when they will actually bite.’

The CIOT has copied the letter to the shadow Chancellor, John McDonnell and Andrew Tyrie, chair of the Treasury Committee.

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