The government has published a bill to clamp down on avoidance of national insurance contributions.
The National Insurance Contributions Bill, introduced on 11 October, is aimed especially at City bonus schemes. Announcing the bill, HMRC said: "Disclosure provisions have revealed that some employers and employees are still using contrived and complex avoidance schemes to avoid tax and NICs, primarily from bonuses paid in the City. This Bill will provide a credible deterrent against current and future avoidance activity."
The bill extends the tax avoidance disclosure rules to schemes that are designed solely to avoid national insurance. It also gives the government powers to enact retrospective anti-avoidance regulations, going back to 2 December 2004 if necessary - the date of last year's pre-Budget report, when the Paymaster General made her statement promising to clamp down on tax and national insurance contributions (NICs) avoidance. Past payments made under a tax and NICs avoidance scheme since 2 December 2004 could potentially be treated as earnings for NICs purposes, as if liability arose at the time the payment was made.
The first use of the bill's powers will be to introduce retrospective regulations, effective from 2 December 2004, to apply NICs liability to employment-related securities charged to income tax under Schedule 2 of the Finance Act 2005. Other changes to the NICs regulations will provide for the payment and collection of NICs liability on past payments. Clauses have been included in the bill to ensure that employers can't pass on to employees their secondary NICs liability on past payments that are caught by the new rules.
The draft bill - which won't take effect until it receives Royal Asset - can be downloaded from the Parliamentary website. A regulatory impact assessment can be downloaded from the HMRC website.