National Insurance Contributions Bill

The proposed new clause seeks to introduce an advanced clearance procedure—which could be both costly and time-consuming—for national insurance purposes that is not available for income tax. Parliament did not consider that such a clearance procedure was necessary when considering legislation to counter income tax and national insurance avoidance in the Finance (No. 2) Act 2005. It is no more appropriate here. The clearance procedure provision in legislation is not necessary to give certainty. Those who take part in contrived arrangements and transactions will know exactly what the purpose of those arrangements is. Those who do not take part in the schemes will be expected to pay income tax and national insurance on the full value of the reward that they pass to the employee. Again, we have this theme of what will happen if there is a change of mind down the track. That is an unfair representation of what this is all about. The regulations are anchored in that December 2004 Statement and the specifics of that Statement, and it is not correct to see the whole of the tax legislation as somehow open to retrospective provisions at the whim of the Treasury. Certainly, companies whose employees are participating in one of the four tax-advantaged share schemes within the parameters sanctioned by Parliament have certainty that they are unaffected. HMRC officials already provide reassurance in individual cases, commonly referred to as the code of practice 10 procedure, where avoidance is not involved. Code of practice 10 tells taxpayers about the different ways that HMRC provides information or advice. HMRC aims to help taxpayers to understand their rights and obligations so that they can get their tax affairs right and pay their tax on time. Moreover—and I understand the caveat that was entered by the noble Baroness—the drafting of the proposed new clause shows the difficulty that such a clearance provision could cause. If either the employer or the employee makes a determination, they may put the other party, who may be wholly in agreement that national insurance is payable, to needless trouble, expense, or concern in providing information. There could be more difficulties if the other party refuses or delays, or disputes the contention. In addition, a second part could be read as meaning that if there is a determination in any one case then it precludes any collection of national insurance under an,"““order made under the powers contained in this Act””;" in other words, across the board in all cases and circumstances. I cannot believe that was the intention of the proposal, and I accept that it was not, but it shows the difficulty in legislating to provide a clearance procedure. I stress, on the issue of general anti-avoidance rules, we do not see this as such. It is a specific response targeted at contrived arrangements and not part of a general anti-avoidance rule. The key to it all is that people know when they are in the arrangements that are going to be caught by this. If noble Lords look at how increasingly sophisticated some of the schemes have become—the noble Baroness recited some of them—they will see that no one could be in any doubt that they will be caught by the arrangements if they indulge in those schemes or subsequent variations. The clearance procedure is unnecessary. I hope that has been helpful to the noble Baroness.