Draft clauses for Finance Bill 2012 released - but statutory tax residence test delayed
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6 December 2011
As anticipated, on 6 December the Government released sections of draft legislation to be included in the 2012 Finance Bill.
The draft legislation includes more details on announcements made in both Budget 2011 and the Autumn Statement on 29 November.
Three of the key areas addressed by the draft legislation are:
- Seed Enterprise Investment Scheme (SEIS) – the introduction of the SEIS was announced in the Autumn Statement and provides tax incentives for individuals investing in small companies with less than 25 employees.
- Lower rate of Inheritance Tax (IHT) for individuals leaving part of their estate to charity – For individuals leaving 10% or more of their estate (after deducting IHT exemptions, reliefs and the nil-rate band) to charity they will benefit from a reduction in the rate of IHT from 40% to 36%.
- Tax rates and bands for 2011/12.
Statutory tax residence test delayed
The tax world was fully anticipating the release of draft legislation introducing a new statutory tax residence test from April 2012. However because of issues raised during consultation, the Government has announced that it will introduce the statutory residence test in Finance Bill 2013 to take effect from April 2013. At the same time it may introduce reforms to ordinary residence.
A further announcement will be made around Budget 2012 when the Government will publish its response to the 2011 consultation together with a further consultation on policy detail and draft legislation.
The current rules that determine tax residence for individuals are complicated and unclear. At Budget 2011 the Government announced that it would introduce a statutory definition of tax residence. Its aim is to create clear rules that provide greater certainty for taxpayers and are simple to use. But we’ll clearly have to wait a bit longer for these!