Annex B to Chapter 6 Tax changes announced before the Budget

* = Negligible.

Inland Revenue taxes

6B.2 It was announced on 24 July 1996 that changes would be made to the rules for giving capital allowances on fixtures in buildings. The changes, which will apply to expenditure incurred on or after the date of announcement, limit allowances to the original cost of the fixture, prevent the acceleration of allowances and remove allowances from fixtures leased to non-taxpayers under equipment leases. Further changes will be made to simplify the operation of the rules (2).

6B.3 The payable tax credits on purchases by companies of their own shares and certain special dividends were removed for distributions made on or after 8 October 1996, to counter tax avoidance (3).

6B.4 It was announced on 11 November 1996 that the Treasury would be laying regulations in January to amend the way that interest rates on late and overpaid income and capital gains tax are calculated. The changes will result in a higher rate of interest being charged for overdue tax and a lower rate of interest being paid for tax overpaid (4).

6B.5 A supplement on repayments of overpaid income tax and CGT under self assessment will be calculated for 1996-97 and subsequent years from the date the tax was paid instead of from the later of the due date or the date of payment (5).

6B.6 On 14 November 1996, the Government announced amendments to the tax rules for corporate loan relationships to correct certain technical defects in the legislation. These measures will align the rules with Parliament's original intentions and will apply from the date of announcement (*).

6B.7 Non-stamp duty restrictions on equity lending will be removed. Legislation about stock lending and manufactured payments will be simplified (*).

6B.8 On 18 November 1996, it was announced that regulations would be made next year to extend and simplify the arrangements for paying gilt interest gross to overseas investors (*).

6B.9 On 12 July 1996, the Government announced a measure to pre-empt the use of artificial derivative transactions to turn interest-like income into capital gains (*).

6B.10 Existing rules allow a group that is selling all of its North Sea licence interests to transfer unused petroleum revenue tax (PRT) reliefs to the buyer. From 23 July 1996, claims for these reliefs made by the buyer will only be allowed if they would have been allowed on a claim by the seller. This puts beyond doubt that the existing rules cannot be manipulated. This will protect substantial amounts of PRT (-).

Customs and Excise taxes

6B.12 A new exemption from VAT for admission charges to certain cultural places and events was introduced from 1 June 1996 (7).

6B.13 A measure was enacted to end VAT avoidance whereby some organisations had been able to avoid VAT on fuel and power by exploiting the zero rate for supplies of water. It took effect from midnight on 26 June 1996 (8).

6B.14 The European Court of Justice issued rulings on 24 October 1996 in two cases involving vouchers. The rulings were that businesses should only account for tax on the sum received for vouchers sold at a discount and that manufacturers should be able to reduce their output tax when making payments to retailers accepting vouchers (9).

Vehicle Excise duty

6B.17 The changes to the construction industry scheme are expected to take effect no earlier than August 1999 (2).

Customs and Excise taxes

6B.19 The Chancellor said in the November 1993 Budget that tobacco duties would be increased on average by at least 3 per cent in real terms in future Budgets (4).

6B.20 The yields shown in lines 3 and 4 of Table 6B.2 include the effects of duty increases in future Budgets. The footnote to Table 6.1 shows only the yield from implementing the commitments in this Budget.

National insurance contributions

Vehicle Excise duty