The broader point is the fact that the Treasury and HMRC constantly review measures to deal with avoidance. My right hon. Friend is right to say that, human ingenuity being what it is, we have to be constantly vigilant, and the Government have closed some 40 loopholes over the course of this Parliament. We will keep the specific measures in the Bill, and more broadly the measures we have taken on accelerated payments and follower notices, under review, but we believe that the measures that we have taken to accelerate payments so that those involved in tax avoidance schemes are no longer able to benefit from a cash flow advantage will have a dramatic effect on the flow of tax avoidance through tax avoidance schemes. We are already seeing indications that fewer schemes are being marketed and fewer disclosures are being made under the provisions on the disclosure of tax avoidance schemes. Every indication suggests that this is a diminishing issue, but there is no place for complacency. The Government will continue to endeavour to take appropriate steps to deal with those who are seeking to defy the spirit of the law or make an interpretation of the law that has little justification but can involve HMRC in extended litigation.
I emphasise that the provisions in the Bill and the Finance Act 2014 are estimated to raise £5 billion in tax and NICs for the Exchequer. The House may find it helpful if I explain that a follower notice sets out HMRC’s view that a judicial decision in another case is directly relevant and that those who receive the notice should settle their disputes. If the taxpayer does not settle in response to the notice, they will face a tax-geared penalty if they are unable to show that their case is materially different from the other party’s litigation, or if they did not have reasonable grounds to continue the dispute.
An accelerated payment may be required from taxpayers in the following circumstances: where a follower notice has been issued and the taxpayer decides not to settle their dispute; where taxpayers are involved in schemes
subject to disclosure under the disclosure of tax avoidance schemes or DOTAS rules: and where taxpayers have used arrangements that HMRC decides to counteract under the general anti-abuse rule or GAAR. For both follower notices and accelerated payments, taxpayers will have 90 days to make representations. There is no formal right of appeal against the notices or payments, but taxpayers can appeal any penalties. These measures are expected to lead to the issue of payment notices to around 43,000 taxpayers involved in avoidance schemes currently under dispute with HMRC over the period to the end of March 2016.
The provisions that apply new information powers and penalties to the highest risk promoters of tax avoidance schemes are also contained in clauses 3 and 4 and schedule 2. Hon. Members may be aware that I mentioned on Second Reading that the measure on promoters of avoidance schemes was first announced in Budget 2013 and the Government’s intention was to extend the measure to NICs at the earliest opportunity. This Bill affords that opportunity.
The Finance Act 2014 included legislation that allows HMRC to issue conduct notices to promoters of tax avoidance schemes and to monitor promoters who breach a conduct notice. This Bill applies the tax legislation to NICs so that the legislation operates as one unified scheme that covers tax and NICs. Monitored promoters will be subject to new information powers and penalties which will also apply to intermediaries that continue to represent them after the monitoring commences. The monitored promoter will be named by HMRC—the naming details will include information on why the conduct notice was breached—and required to inform its clients that it is being monitored by HMRC. Clients of monitored promoters will also be subject to certain obligations, which have a penalty for non-compliance, and extended time limits for assessments.
Other provisions apply a new targeted anti-avoidance rule to prevent people from circumventing new legislation, tackling avoidance involving employment intermediaries. The proposed TAAR is contained in clause 5. On Second Reading, I mentioned that the National Insurance Contributions Act 2014 strengthened existing legislation in respect of offshore employment intermediaries. That measure was specifically intended to address the non-payment of employer’s national insurance in the oil and gas industry involving the placement outside the UK of the employer of oil and gas workers who are working on the UK continental shelf.
The temporary labour market is quick to react to any legislative changes and to find new convoluted ways to reduce the amount of income tax and NICs that it would otherwise be liable to pay. Interested parties have indicated to HMRC that intermediaries involved in the facilitation of false self-employment may set up avoidance vehicles involving convoluted structures specifically designed to circumvent the legislation introduced in the National Insurance Contributions Act 2014. To dissuade such intermediaries the Bill includes a TAAR that would be similar to the tax TAAR included in the Finance Act 2014 for the same purpose—to deter NICs avoidance. The TAAR focuses on the motive for setting up the arrangements, namely the avoidance of NICs, and what they achieve—whether they result in less national insurance contributions being paid. In order that the tax and
NICs TAARs operate as one, the tax TAAR and the corresponding provisions of the NICs TAAR will both take effect from 6 April 2014.
In conclusion, this is an important and necessary Bill. The modernisation of the way that class 2 NICs are assessed and collected will make the system simpler and more straightforward and will reduce administrative burdens on the self-employed. The Bill also includes a package of measures aimed at making activity that attempts to reduce the amount of NICs payable to the Exchequer harder to accomplish.
I thank hon. Members who participated in the debates on the Floor of the House as well as in Committee. The Bill is good for the self-employed and it makes NICs avoidance harder. I commend the Bill to the House.
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