I beg to move, That the Bill be now read the Third time.
We have reached the final stage of the House’s deliberations on the National Insurance Contributions Bill, and it is worth noting the broad, if not necessarily vociferous, support for the Bill across the House. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) has been vociferous and meticulous in her scrutiny of it, and I also thank external interested parties that have contributed to the consultation and to our deliberations. The Bill will make it easier for the self-employed to comply with their national insurance contributions obligations, while also making NIC avoidance harder.
Let me remind the House of the provisions in the Bill and what it seeks to achieve. Broadly, the Bill contains four measures: simplifying national insurance contributions paid by the self-employed; accelerating the payment to the Exchequer of NICs in dispute in avoidance cases and providing for the issue of follower notices where the scheme or arrangements have been shown to fail in another party’s litigation; applying new information powers and penalties to promoters of avoidance schemes; and introducing a targeted anti-avoidance rule—TAAR—to prevent people from circumventing new legislation tackling avoidance involving employment intermediaries and offshore employers.
At Budget 2014, the Chancellor announced that the Government intend to simplify the NICs collection process for the self-employed, who currently have to operate two different processes for two separate classes of NICs. This followed a 2012 recommendation by the Office of Tax Simplification and a consultation in 2013.
Two separate collection methods for class 2 and class 4 NICs cause confusion and extra work for both the self-employed and HMRC. The objective behind this measure is to modernise the way class 2 NICs are assessed and collected, making the system simpler and more straightforward and reducing administrative burdens on the self-employed. Class 2 NICs are currently collected via a flat rate charge of £2.75 per week paid through six-monthly billing or by direct debit, while class 4 NICs are a percentage charge on profits—of 9% between the lower and upper profits limit and 2% above the upper profits limit—paid through self-assessment alongside income tax.
The aim of clauses 1 and 2 and schedule 1 is to change the way in which class 2 NICs are structured; change the means by which class 2 NICs are collected by moving their collection into self-assessment, so that they can be collected alongside class 4 NICs and income tax; change the means by which class 2 NICs are enforced with changes to associated appeal rights to broadly mirror those for class 4 NICs and income tax; and make consequential changes to legislation relating to maternity allowance to allow women to continue to become eligible for it post-reform. These changes are proposed to take effect for the 2015-16 tax year onwards
so that the collection of class 2 NICs under self-assessment will be from 6 April 2016. I wish to draw particular attention to the tax information and impact note published by HMRC about this measure. This indicates a very welcome net administrative burden reduction to the self-employed of £74 million over five years as a result of these reforms.
The provisions that deal with accelerating the payment to the Exchequer of amounts of NICs in dispute in avoidance cases also include providing for the issue of follower notices in relevant cases when the scheme or arrangement has been shown to fail in another party’s litigation. These provisions are contained in clauses 3 and 4 and schedule 2. The provisions on follower notices and accelerated payments in avoidance cases broadly follow, for NICs, new powers that are included in the Finance Act 2014 which allow HMRC to issue a notice—a follower notice—to taxpayers who have used avoidance schemes that have failed before the courts in another party’s litigation.