It is a pleasure to take part in a Report stage where the Government do not have amendments to their own Bill. That is quite unusual these days. Most of the Bills that we have seen recently have had Government amendments
to them because there have been errors in the drafting, so I congratulate to the Minister for managing to bring in one that has not. Obviously, it would be great if he could see his way to accepting all the amendments tabled by the Opposition and by me, but he can save that up for his speech and let us know then whether he is willing to do so.
I will talk us through the amendments that we have tabled but also make it clear that we are willing to support the amendments tabled by the Opposition. Our new clause 2 is about the impact of the changes to class 1A national insurance contributions on termination awards. It asks for a number of different things, including
“an assessment of the expected impact on…the total net value of termination payments received by individuals…the average net value of such payments; and…the number of business start-ups that are funded by termination payments…in each region of the United Kingdom.”
We ask for this for a number of reasons, but mostly because I was a bit annoyed by what is in the Government’s explanatory notes, which basically said, “We expect there to be no impact on employees”, but actually meant, “We expect there to be no additional tax liability impact on employees.” But the reality is that there will be an impact on employees as employers will choose to give their employees less in termination awards because they will be liable for this class 1A contribution.
I specifically mentioned the number of business start-ups because I am acutely aware of the number of people, particularly where I am in Aberdeen, who struggled during the oil price fall that occurred in 2015-ish and were made redundant as a result of it. A number of them went on to start new businesses because of the termination payment that they received. I am concerned that reducing the amount of termination awards that people receive will mean that there will be fewer of those new business start-ups, and we may not see some of those businesses that go on to be phenomenally successful just for want of a few extra pounds in the termination award that is made.
Another thing that concerns me is that the Government’s projections show that wages for everybody will fall as a result of this additional charge on employers. The Government have admitted that; it is included within the calculation. Even people who are not receiving termination awards or are not, at any stage, likely to receive them—even those who are receiving only the Government’s national living wage, which is a pretendy living wage that people cannot live on, and those who are under 25 and therefore not eligible for it—will experience a reduction in wages as a result of the Government’s changes to employer class 1A liability in relation to termination awards. It is not fair that we are asking people who already do not have enough to live on to pay this additional contribution. That might seem to be an odd position to take in this Chamber when we have Conservative leadership candidates talking about lowering tax for the very richest, but I do not believe that wages should be lowered for those at the bottom of the pile, to increase what is in the Government’s coffers. If we are to do that, surely we should choose, as the Scottish Government have done, to levy that money through a more progressive taxation system.
The other issue with the termination awards aspect relates to the collection method that is described. Currently—this is from the Government’s website—employers pay class 1A
and 1B national insurance on expenses and benefits they give to their employees. They have to fill in the forms only once a year and are given a deadline for doing so. The Government have not yet said how they intend these payments to be paid in real time, or how they intend that employers should ensure that they are recording them and paying them in real time. If the Government expect them to do this, they need to clarify that more quickly. I am particularly concerned about the employers who currently do not pay class 1A contributions in any way, shape or form because they do not allow employee benefits such as company cars or health insurance as part of their deal, yet they are now being brought into class 1A contributions because, for some unknown reason, the Government have chosen to use class 1A contributions as the method of collection—the method of liability—rather than choosing a different method. Class 1A contributions are not levied on any cash just now; they are levied only on benefits in kind.
Therefore, a number of employers will need to have new computer systems to pay this money. Those who do already pay for benefits in kind will need to have a different computer system that allows them to pay in real time rather than at the end of the year. That will involve a lot of additional work for HMRC and for tax professionals who will have to advise employers on this method. That is an extra cost to employers—not just the actual additional money that they will have to pay but the additional administration cost that they will have to go through. It is incredibly important that if the Government intend to press ahead with this, they do everything they can to ensure that every employer who does not currently have any liability for class 1A contributions, in particular, is well aware of these changes and the new liability that will arise if they make any termination payments in excess of £30,000.
Let me move on to sporting testimonials. My concern is much the same as that raised by Opposition Front Benchers in relation to the donations to charities that are made as a result of sporting testimonials. There will be a new liability for people receiving money as part of sporting testimonials as long as they are not paid through an employee charitable donation-type method. It is a bit much to expect committees that are set up to have to register themselves in this way to pay the sporting testimonial beneficiary through payroll giving. That is a bit of an over-cumbersome situation. A lot of the people who receive money through sporting testimonials give a significant chunk of it to charities. I am therefore concerned about the reduction in charitable giving that there will be as a result of these changes.
The Government have pretty much said that this has a negligible Exchequer impact, but, once again, an additional administrative burden is being built up. This may stop some of these committees going forward with testimonials if they realise that they have to register for payroll giving and have to pay class 1A national insurance contributions as a result.