Strengthening sanctions and deterrents

The government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC. The government will also remove the
defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses such arrangements.

Money Purchase Annual Allowance (MPAA)

Changes introduced in April 2015 gave individuals greater flexibility over how and when they take their
pension savings.

Once a person has accessed pension savings flexibly, if they wish to make any further contributions to a
defined contribution pension, tax-relieved contributions are restricted to a special MPAA.

Subject to consultation on the detail, the MPAA will be reduced from £10,000 to £4,000 from April 2017.

VAT Flat Rate Scheme

There will be a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses. Anti-forestalling provisions have been introduced to prevent any business defined as a limited cost trader from continuing to use a lower flat rate beyond 1 April 2017.

VAT fraud

The Finance Bill 2017 will introduce a new penalty for participating in VAT fraud. It will be applied to
businesses and company officers when they knew or should have known that their transactions were
connected with VAT fraud. The new penalty will be a fixed rate penalty of 30% of the VAT due.

Disguised remuneration schemes

Previously announced changes intended to tackle the use of disguised remuneration schemes by employers and employees will be extended to include the self-employed.

Employee Shareholder Status (ESS)

The tax advantages linked to shares awarded under ESS will be abolished for arrangements entered into on, or after, 1 December 2016. The status itself will be closed to new arrangements at the next legislative
opportunity.