National Insurance Contributions Bill

I beg to move, That the Bill be now read a Second time. At the time of the pre-Budget report on 2 December 2004, I made a statement to the House that outlined how, despite the best efforts of successive Governments since 1994, we continued to be presented with ever more complex and contrived arrangements designed to avoid income tax and national insurance on the rewards from employment. I made it clear that we intended to close down such activity permanently. In my statement, I recalled that earlier attempts at such avoidance took the form of paying bonuses and salaries in gold bullion, diamonds and fine wine. When those routes were closed, employers started to pay bonuses through ever more sophisticated financial instruments and securities to reduce the amount of national insurance that they had to pay, to avoid their obligation to operate pay-as-you-earn, and to reduce employees’ tax bills. The tax avoidance disclosure rules that were introduced in the Finance Act 2004 brought to light many—more than 100—examples of such schemes that had been devised or marketed by promoters. That showed that a significant minority of employers and their advisers were continuing to devise, operate and market ever more contrived avoidance schemes to disguise what is, in effect, remuneration. Without prompt and decisive action, there was a genuine possibility of tax and national insurance contributions avoidance schemes continuing, to the detriment of the Exchequer and the many employers and employees—the majority—who pay their fair share of tax and national insurance. I gave notice of our intention to deal with any similar arrangements that emerged in future that were designed to frustrate our intention that employers and employees should pay their fair share of tax and national insurance on the rewards from employment. When we become aware of arrangements that attempt to frustrate that intention, we will introduce legislation to close them down and, when necessary, with effect from 2 December 2004.