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National Insurance Contributions Bill [Bill 80 of 2014-15]

Published Thursday, August 21, 2014

The National Insurance Contributions Bill 2014-15 would allow for both categories of National Insurance contributions (NICs) which are payable by the self-employed – Class 2 and Class 4 – to be collected through self assessment from April 2016. The Bill would also extend existing tax rules regarding ‘accelerated payments’ and ‘high-risk’ tax promoters to NICs, and introduce a Targeted Anti-Avoidance Rule to prevent the avoidance of NICs by intermediaires.

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The National Insurance Contributions Bill 2014-15 has four elements:

• Simplifying NICs paid by the self-employed: the Bill would move the collection of Class 2 NICs into self assessment, for the 2015/16 tax year onwards. This would mean that this category of NICs paid by the self-employed could be collected alongside Class 4 NICs and income tax from April 2016.

• Extending new rules for follower notices & accelerated payments to NICs: under Part 4 of the Finance Act 2014, HMRC may issue ‘follower notices’ when in dispute with a taxpayer over the tax benefit delivered by an avoidance scheme. Where HMRC take the view that the scheme is the same as one that has been reversed in the courts, it may notify the taxpayer and require that they make a pre-payment of the amounts of tax at stake. These monies would be held by HMRC until the taxpayer’s final liability has been determined. HMRC may also require an ‘accelerated payment’ where the taxpayer has used an avoidance scheme reported under the Disclosure of Tax Avoidance Schemes (DOTAS) regime, or a scheme that falls foul of the General Anti-Abuse Rule (GAAR). The Bill would extend HMRC powers to issue follower notices and demand accelerated payments in similar circumstances for NICs.

• Extending new rules for ‘high-risk promoters’ to NICs: under Part 5 of the Finance Act 2014, HMRC may place conditions on the conduct of individual accountancy businesses and other promoters of tax avoidance schemes. Where a promoter breaches the terms of this conduct notice, HMRC has new powers to obtain information and impose penalties. The Bill would extend this regime to NICs.

• Introducing a Targeted Anti-Avoidance Rule for intermediaries: in 2014 the Government introduced new rules to tackle tax avoidance by ‘intermediaries’ – employment businesses or agencies who liaise between workers and client companies using their services. This avoidance activity had consisted in exploiting the way tax and NI rules apply to intermediaries based offshore, and by facilitating false self-employment. Legislation with regard to income tax was included in the Finance Act 2014; equivalent provisions with regard to NICs were made in secondary legislation. The Finance Act 2014 also included a Targeted Anti-Avoidance Rule (TAAR) - legislation to ensure that further false self-employment schemes that sought to circumvent these new rules could be struck down in court. The Bill would provide for a similar TAAR for NICs.

Commons Briefing papers RP14-45

Author: Antony Seely

Topics: National insurance, Taxation

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