National Insurance Contributions Bill

moved Amendment No. 37:"After Clause 7, insert the following new clause—" ““ADVANCE CLEARANCE (1)   The Treasury shall make regulations whereby the Commissioners for Her Majesty’s Revenue and Customs may, on the application of an employer or employee, make a determination as to how and to what extent national insurance contributions are to be paid in respect of any amount or transaction. (2)   If a determination is made in accordance with arrangements made under subsection (1), no order made under the powers contained in this Act shall have the effect of imposing additional national insurance contributions provided that all relevant information was disclosed to Her Majesty’s Revenue and Customs.”” The noble Baroness said: the amendment would insert a new clause after Clause 7. It would set up an advance clearance mechanism for taxpayers to determine the national insurance effect of transactions so that, provided that full disclosure is made, the taxpayer can obtain some certainty. In particular, if the Treasury decides to issue retrospective regulations under the Bill, transactions for which clearance has been obtained would not be affected. I should say that for the purposes of today’s debate, the amendment is probing and I claim no virtue for its drafting, but I hope that the Committee will understand well enough the issue that I seek to raise. The Treasury Committee in another place examined the Bill. The chairman, Mr John McFall, was clear that the Bill amounts to a general anti-avoidance rule. The noble Lord, Lord Newby, referred to that on Second Reading and said that his party was considering the advantages of moving to general anti-avoidance rules—or GAARS, as they are known in the trade. I am ambivalent about moving to a GAAR regime, as there are other pluses and minuses to it and I am not clear where the balance actually lies. However, I am clear that a necessary part of general anti-avoidance rules is a clearance procedure, which is what my amendment proposes. Throughout the Bill’s passage, the Government have presented national insurance and related income tax avoidance as concerning only artificial and contrived schemes that anyone would recognise as being set up merely to gain tax and national insurance advantage. I am not concerned with those. If they were presented for advance clearance, they would not get it. I am concerned about schemes or arrangements on the borderline between what might be acceptable planning and what might be viewed as avoidance. I am sure that the Minister will agree that the territory is not black and white. There is a spectrum and the point in the spectrum that tips from acceptable to unacceptable may well change over time. I am sure that that has happened. I referred earlier to legitimate ways of using the existing structure of tax and national insurance to minimise those liabilities. The example I gave earlier was that of pension schemes to which employers make contributions. That does not normally result in a benefit either for tax or national insurance purposes. I am sure that the Minister will say that the Government do not have such areas in their target, but my point is that there is no certainty. Governments can and do change their minds. I already referred to the shift of view of incorporation for small businesses. Another more recent example is the change of view on self-invested personal pensions (SIPPS), where the Government liberalised the investment regime, stuck to that for quite a long time but then, all of a sudden, declared it to be abusive and needing to be closed down. Those are changes over a relatively short period. I have not done a lot of research, but if we look over a longer period, we can see a number of shifts in attitude. There is a spectrum and we determine what is acceptable and unacceptable in different ways at different points in time. Because the Bill provides for an unprecedented degree of retrospection, it would allow the Treasury to decide in six years’ time, say, that it does not like some way that tax and national insurance reliefs are being used. Without some kind of clearance regime, the business world—both employers and employees—will be at risk of such changes of mind. The Minister rejected my earlier request to limit retrospection to the date that the announcement was made in particular cases. I regret that, but I understand that the spectre of large amounts of tax disappearing overnight before regulations can be announced is of concern. This amendment is another way of trying to deal with the same problem and obtain certainty. Those constructing artificial schemes simply would not get clearance. I know that the Minister spent much of his career, as I did, advising businesses. A reasonable degree of certainty is essential to be able to plan businesses; uncertainty can have a corrosive effect. So I hope that the Minister will be sympathetic to my points although, as I said earlier, I claim no particular virtue for the form of words in which my amendment appears. I beg to move.