My Lords, national insurance Bills, as I am sure many noble Lords are aware, occur regularly, often every two to three years, and NICs—as I will refer to them—have been debated countless times in this House since their introduction in 1911.
The Bill before noble Lords today is short but important, and it allows the Government to implement two new national insurance reliefs to support employers to hire new staff and deliver on manifesto commitments. It contains just 14 clauses and introduces four new measures: first, an employer NICs relief for new employees in free ports; secondly, an employer NICs relief for employers of veterans; thirdly, an exemption for test and trace support payments from self-employed NICs; and fourthly, changes to disclosure of tax avoidance schemes legislation with regards to NICs. I will explain each of these measures in more detail.
I will start with the employer NICs relief for new employees in free ports, which is contained in Clauses 1 to 5. This measure will support the delivery of the Government’s free ports programme, which will attract new businesses and regenerate communities by creating jobs, boosting investment and spreading prosperity.
Free ports present a great opportunity to drive regional growth, and the Government want as many areas across the UK as possible to benefit, including in Scotland, Wales and Northern Ireland. At the Budget, the Chancellor announced the locations of the first eight free ports in England. These sites, which range from Teesside to Tilbury, will become hubs for trade, innovation and commerce. They will attract new businesses and regenerate communities by creating jobs, boosting investment and spreading prosperity.
Noble Lords will be aware that a large part of the appeal of free ports for employers will be the wide variety of tax reliefs available. The incentives aimed at promoting regional growth include: an enhanced 10% rate of structures and buildings allowance; an increased 100% capital allowance for companies investing in plant and machinery; and full relief from stamp duty on land or property purchases.
In addition to these measures, we are also encouraging firms located in free ports to recruit employees based locally. The employer NICs relief for new workers in free ports, contained in this Bill, will help to achieve this goal, while supporting regional growth. Under this measure, employers with premises in a free port in Great Britain will be exempt from employer NICs on up to £25,000 of a new worker’s wages. This legislation applies to all new workers who spend 60% of their working time at a free port tax site in the first three years of employment. The relief will be available from 6 April next year, and it is the Government’s intention to make this relief available for up to nine years.
By April 2026—at the four-year mark of the scheme—the use and effectiveness of the relief will be reviewed and a decision will be required by the Government on whether to extend the relief beyond its earliest end date of 5 April 2026. Any decision to extend will be taken only on review of the relief’s impact. However, even if the Government decide not to extend the relief, employers will be able to claim it for the full three years on new hires taken on or before 5 April 2026.
Although these measures relate to Great Britain, I assure the House that it is the Government’s intention to legislate for this relief in Northern Ireland as soon as it is practicable. The Government remain in constructive discussion with the Northern Ireland Executive about the detail of the offer in Northern Ireland, and it is right that we ensure that the appropriate time is given for these discussions to continue to ensure that the offer is right for ports, businesses and communities in Northern Ireland, and meets our international legal obligations. Noble Lords will be aware that the Bill provides the Government with the power to set out the detail of the employer NICs relief in Northern Ireland in regulations that are subject to the affirmative procedure, once engagement with the Northern Ireland Executive is complete.
I now turn to the measure concerning the NICs relief for employers of veterans, which is contained in Clauses 6 and 7. As Noble Lords may recall, this policy was announced at Spring Budget 2020. It also fulfils a manifesto commitment to reduce employer NICs for a full year for every new employee who has left the Armed Forces, and to support veterans as they transition into civilian life. The UK’s veterans have given extraordinary service to our nation, but we know that some face great challenges in obtaining secure and fulfilling employment. It is only right that we do all we can to help them.
As noble Lords will be aware, this House has just passed the Armed Forces Bill, which, among other measures, fulfils the 2019 manifesto commitment to incorporate further the Armed Forces covenant into law. The new provisions in that Bill relating to the covenant are part of Government’s programme to ensure that members of the Armed Forces, veterans and their families are treated fairly.
Under this legislation, organisations will not pay employer NICs on earnings worth up to £50,270 in a veteran’s first full year of civilian employment. This amounts to a saving of up to £5,500 per hired veteran for the 2021-22 tax year. Indeed, the Federation of Small Businesses has urged
“every small employer to consider the value this relief can bring in helping them take on a new member of staff”.
This measure constitutes a real boost to veterans’ employment prospects. It should mean that many more businesses benefit from our veterans’ brilliant skills and experience.
I turn to the next measure included in this Bill: the exemption of test and trace support payments from self-employed NICs. At every stage of the coronavirus crisis, this Government have done what it takes to support the people of this country. However, if we are to contain the spread of the virus, it is crucial that those told to self-isolate by NHS Test and Trace do so.
Last September, the Government announced the launch of a £500 support payment in England for low-income individuals who had been told to self-isolate but could not work from home and would lose income as a result. As of 17 November 2021, local authorities have reported 362,573 successful claims since the start of the scheme, totalling £181.3 million in payments in England. Happily, the Scottish and Welsh Governments announced similar schemes shortly afterwards.
These payments, which were provided by local authorities, would ordinarily be subject to employee and employer, class 1 and 1A, and self-employed, class 2 and 4, NICs under long-standing legislation. Last year, we introduced secondary legislation to exempt payments under the support schemes from employee and employer, class 1 and 1A, NICs. The measure contained in this Bill will extend this exemption to the self-employed.
This legislation is intended to ensure these workers are treated consistently with their employed counterparts and do not have to pay NICs on support payments. It will therefore retrospectively exempt test and trace support payments from class 2 and 4 NICs for the 2020-21 tax year. It will also ensure that, in future, test and trace support payments will not be included in profits liable to class 2 and 4 NICs.
I turn to the final measure in this Bill: the changes to the disclosure of tax avoidance schemes regime for NICs, contained in Clause 11. Noble Lords may recall that the so-called DOTAS legislation was introduced in 2004. It seeks to provide HMRC with early information about new tax avoidance schemes, how they work and those who use them. The provisions in the Finance Act 2021 enhance the operation of the DOTAS regime, ensuring that HMRC can act decisively when promoters fail to provide information on suspected avoidance schemes.
In this regard, the NICs Bill includes changes to an existing regulation-making power in the Social Security Administration Act 1992. It will also ensure that HMRC can warn taxpayers about suspected avoidance schemes earlier than at present. In addition, this Bill places responsibility for the obligations within DOTAS and any failure to comply with them on both promoters of these schemes and their suppliers. The measure will
not adversely impact legitimate businesses giving legal and commercial advice. Only those actively participating in the promotion, marketing or enabling of avoidance will be pursued.
By strengthening the existing anti-avoidance regimes and tightening rules we will ensure that those involved in promoting these unscrupulous schemes face the full consequences of their actions. I assure noble Lords that the Government will continue vigorously to tackle all avoidance schemes and their promoters.
I would like to say a few words about the report of your Lordships’ Delegated Powers and Regulatory Reform Committee, which has recently come out. I wish to reassure the committee and noble Lords here today that the Government are carefully considering the recommendations made by the committee. We will write to the committee with our response to the recommendations made, ensuring full transparency, in due course.
I conclude by briefly reminding the House of this Bill’s key purposes. It supports regional growth, and with it our levelling-up agenda; it boosts employment, while helping to protect those on low incomes from the financial impacts of Covid-19; and it strengthens our powers to tackle promoters of avoidance schemes. With that, I commend the Bill to the House.
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