National Insurance Contributions Bill

moved Amendment No. 3:"Page 2, line 9, at end insert—" ““(   )   Nothing in subsection (2) shall authorise regulations to be made which have the effect of increasing national insurance contributions paid by an employer or an employee in respect of a payment or transaction if its effect for national insurance purposes has been determined by the Commissioners for Her Majesty’s Revenue and Customs, a tribunal or a court before the regulations are made.”” The noble Baroness said: I shall speak also to similar amendments, Amendments Nos. 14, 24 and 29, in the group. The amendments seek to moderate the impact of Clauses 1 to 4. We turn to the theme of retrospection, which underpins a number of the amendments this afternoon. The amendments propose that, where the national insurance impact of something has been determined before regulations are made, the matter should not be re-opened. For this ““something”” I have used the words ““payment or transaction””. They may not be the right words. Leaving aside that drafting point, the issue is why the Treasury should have power to re-open matters that have already been determined. One of the proper attributes of a taxation system is the ability to achieve certainty. There are processes within the tax system designed to confer finality. That can be the formal determination by commissioners or the decisions by tribunals, special commissioners or a court. Let us suppose that part of my earnings were in the form of shares or share options, which is very common and not an automatic hallmark of avoidance. Let us further suppose that the way this was structured led to a national insurance advantage. In one scenario the HMRC officials know all about it and the relevant officer determines the liabilities for both the employer and employee. He does that with or without modification or change. In another scenario the HMRC official thinks that national insurance is payable and the employer does not. That leads to an appeal and HMRC is overruled. It seems to me that the taxpayer in those circumstances has the right to believe that his position has been settled. He does not expect that the Treasury can say, ““Oh no, we do not agree with all of that; we are going to pass regulations which will re-open it””. I think that the Bill allows the Treasury to do that. I take as an example Clause 1(1), which inserts two new sections into the Social Security Contributions and Benefits Act 1992. The first is new Section 4B, which contains the main power to make retrospective regulation. Subsection (9) seems to say that even if something has been determined when the regulations are made, it can be redetermined. Similarly, in new Section 4C, which deals with consequentials, subsection (6), in different language, seems to allow for unlimited redetermination. We do not think that it is fair or reasonable for retrospection to have this effect, as it would undermine the trust that should exist between taxpayers and HMRC. We do not understand why such a draconian power is necessary. If HMRC has all the facts before it and thinks that there is a problem, clearly it can hold back from making a determination and say to the Treasury, ““We want regulations to stop all of this nonsense”” so it does not have to make a determination and settle something. But if it chooses to make a determination, it seems that it should be bound by it. I hope that the noble Lord will see that I am not challenging retrospection per se, merely the extent of retrospection, and in particular in relation to settled decisions where I suggest that it would not be right to allow HMRC to make a determination and then, in effect, to renege on it. That is not the general scheme of tax law, which allows HMRC to reopen settled years only where there are specific reasons—and not that it has simply changed its mind. My amendment says that if a determination has happened before the regulations are made the determination should not be reopened. I thought about making that an earlier time—for example, when the Treasury announces that it will make regulations—but in practical terms it seems that, once an announcement has been made, it is wholly within the powers of HMRC to make a determination, or not. If it is stupid enough to make a determination while announcing that regulations are to be made, then it is not for subsequent regulations to unwind that. I still stick by the timing that I have put in my amendments. I hope that the Minister will see that the amendment does not seek to attack the heart of retrospection but merely to achieve a fair outcome for those taxpayers who have been through the processes that determine liability and to give certainty. In those circumstances, I beg to move.