The newly published National Insurance Contributions Bill takes forward the announcement made on 2 December 2004 that, where HMRC becomes aware of tax and NICs avoidance schemes, the Government will legislate to close them down, where necessary, from that date.

The Bill contains the power to make anti-avoidance NICs regulations effective from the same date as the anti-avoidance tax measures to ensure that employers and employees using contrived schemes cannot avoid paying their correct NICs liability.

The Bill also extends the tax avoidance disclosure rules to NICs avoidance arrangements, and ensures that employers cannot pass on their NICs liability on past payments of share-based earnings to their employees.

Genuine employee share schemes and share option plans will not be affected by the new rules. According to the HMRC, disclosure provisions continue to reveal 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.

The measures in the new Bill include:

• applying NICs liability to employment related securities charged to income tax by Schedule 2 of Finance (No. 2) Act 2005 effective from 2 December 2004
  
  
• the payment and collection of the NICs liability on past payments and consequential effect on statutory payments and contributory benefits
  
  
• a power to make NICs regulations that will ensure that any NICs-only avoidance scheme or arrangement is disclosed. (The Disclosure Rules in Finance Act 2004, which required promoters to report tax avoidance schemes, did not cover schemes or arrangements that avoided NICs only.)
  
  
• measures to prevent the potential transfer of employers' secondary NICs liability in respect of past earnings which are caught by the regulations made under the provisions in this Bill, by way of Agreements or Joint Elections, due on earnings from certain types of share and securities to the employee.

...back to 20 October 2005


Sources:
National Insurance Contributions Bill
National Insurance Contributions Bill
National Insurance Contributions Bill

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