National Insurance Contributions Bill

Perhaps I should start by emphasising that there is no black hole in the public finances. The Government are meeting our strict fiscal rules. Even under cautious assumptions of PBR, 2005 projections show the golden rule and the sustainable investment rule are met over the current cycle. The proposed new clause requires HMRC to provide a report to Parliament on the effectiveness of the Bill in collecting additional national insurance contributions. Revenue from this measure will be treated together with the revenue that we get from all our enforcement and anti-avoidance activities, and not specifically earmarked or attributed. In accordance with government policy, there will be a post-implementation review within two years of the measure coming into force, and a full evaluation of the measure within three years. The aim of the Bill is to deter future NIC avoidance. There is already evidence that, following the announcement of the Paymaster General on 2 December 2004, employers that were intending to use NIC avoidance schemes did not in fact do so. HMRC engages in regular discussions with employers, their representatives and other tax and NIC experts, which provide a valuable source of feedback for issues arising. HMRC will continue to listen and respond appropriately to such representations. In addition, there will be a post-implementation evaluation of the measures in the Bill, as follows. In relation to Clauses 1 to 4, the measures are primarily a deterrent to employers and their representatives who use such arrangements to avoid paying their fair share of national insurance on disguised remuneration. But for those that are willing to take the risk, we want to be able to act decisively and recoup any national insurance that has been avoided. The disclosure of avoidance products will provide some evidence for evaluating the effect of the Bill in terms of the numbers of schemes developed and the type of those schemes. On Clauses 5 and 6, wherever national insurance liabilities imposed affect an avoidance arrangement, HMRC plans to check the appropriate records to ensure that the employer’s national insurance liability was not recovered from the employee. We do no anticipate a need to evaluate the measure beyond that routine information check. Regarding Clause 7, both HMRC business support teams and employer compliance teams will regularly visit employers who use avoidance schemes and will be able to report back to HMRC technical experts should there be problems in operating the rules or if there is evidence of significant non-compliance. Further feedback will be received from promoters and employers under the disclosure rules. We do not anticipate a need to evaluate the measure beyond that routine information gathering. However, we will continue to monitor taxpayer behaviour to assess changes in the use of avoidance products and whether the tax that is paid accords with that which would be expected if employment reward is not paid in a non-contrived and non-artificial way. We will attempt to do so when we receive taxpayer self-assessment returns and employer returns covering the period after the announcement in the Pre-Budget Report. I hope that noble Lords will agree that with the substantial provisions in place for monitoring and evaluation of the measures in the Bill, the proposed new clause is not necessary and they will withdraw it.