The second Finance Bill of 2017 has been published, aimed at making the tax system fairer by cracking down on avoidance and evasion and at increasing tax revenue for public services. Accompanying explanatory notes can be found here.

Measures include new penalties for those who enable the use of tax avoidance schemes that are later defeated by HMRC and changes to prevent individuals from using artificial schemes to avoid paying the tax they owe on their earnings. The Bill also legislates for a number of policies of particular interest to many charities.

Clause 14 and Schedule 1 make a number of changes to the Social Investment Tax Relief (SITR) scheme. The changes increase the amount that newer eligible social enterprises may raise to £1.5 million and align the rules with the European Union General Block Exemption Regulation for risk finance investments. Amendments also include provisions to better target the scheme on higher risk activities and deter abuse.

Clause 21 and Schedule 6 introduce a relief from corporation tax for qualifying museum and gallery exhibitions, allowing them to claim an additional deduction in computing their taxable profits and where that additional deduction results in a loss, to surrender those losses for a payable tax credit. Only charitable museums or galleries or their wholly owned subsidiaries, or a wholly owned subsidiary of a local authority which maintains a museum or gallery are within the scope of this relief. A charity must be within the charge to corporation tax (this does not mean that a charity has to pay corporation tax to qualify).

Clause 60-62 and schedule 14 put in place the relevant legislation to allow the Government to pursue its Making Tax Digital agenda. Specifically, clause 60 enables the government to make business taxes digital for income tax purposes, as announced in the 2015 Autumn Statement, from a future date to be decided. Clause 61 and schedule 14 enable delivery of the Government’s commitment to abolish separate tax returns for partners where they have no other income to report other than their share of the profits from a partnership. Clause 62 enables regulations to be made requiring VAT-registered persons with turnover above the VAT registration threshold to keep digital records and provide regular digital updates to HMRC.

Charities should also be aware of the introduction of a new penalty for participating in VAT fraud in Clause 68.

The second reading of the Finance (no. 2) Bill 2017-19 is due on 12 September 2017.