DPRR/13-14/84
NATIONAL INSURANCE CONTRIBUTIONS BILL
Memorandum for the House of Lords Delegated Powers and Regulatory
Reform Committee
INTRODUCTION
1. This memorandum has been prepared by Her Majesty’s Revenue and
Customs (HMRC) for the purposes of the House of Lords Delegated
Powers and Regulatory Reform Committee. It identifies the provisions in
the National Insurance Contributions Bill (the Bill) which confer powers to
make delegated legislation. It explains the purpose of the delegated power
proposed; why the matter is to be dealt with in delegated legislation; and
the nature and justification for any parliamentary procedures which apply.
BACKGROUND
2. The Bill takes forward a number of Government announcements. The
provisions of the Bill where powers have been taken are those:

Creating an employment allowance for businesses, charities and
Community Amateur Sports Clubs;

Introducing a reduced rate of secondary Class 1 National Insurance
contributions (NICs) for all employers in respect of the earnings of a
specified age group;

Applying the general anti-abuse rule (GAAR) to NICs;

Introducing a statutory mechanism as part of the Budget measure on
Partnerships Review to tackle the tax issue arising from the interaction
of the Alternative Investment Fund Managers Directive (AIFMD) and
the existing partnerships rules; and

Treating certain individuals as employed earners of a Limited Liability
Partnership (LLP).
3. The Bill extends the extent of an existing vires for oil and gas workers on
the UK Continental Shelf. It also amends the parliamentary procedure for
1
DPRR/13-14/84
an existing power in the Social Security Contributions and Benefits
(Northern Ireland) Act 1992 (SSCB(NI)A) and makes it clear what form
instruments made by the Secretary of State under the Social Security
Administration (Northern Ireland) Act 1992 (SSA(NI)A) should take.
The Employment Allowance
4. Employers have to pay NICs for each of their employees. The Chancellor
announced at Budget 2013 that from 6 April 2014 every business, charity
and Community Amateur Sports Club in the UK will be entitled to an
employment allowance of up to £2,000 towards their employer NICs bill to
reduce the cost of taking on new staff for small businesses.
Reduction of secondary class 1 NICs for under 21s
5. In his Autumn Statement on 5 December 2013, the Chancellor of the
Exchequer announced a zero rate of secondary Class 1 NICs for all
employers in respect of the earnings of any employee under the age of 21.
The measure will apply both to new and existing employees aged under
21 with effect from 6 April 2015. The provisions in the Bill giving effect to
the announcement include a regulation-making power, exercisable by the
Treasury, to extend a reduced rate of secondary Class 1 NICs to earnings
of employees in other age groups.
General Anti-Abuse Rule (GAAR)
6. The Government announced at Budget 2012 that it had accepted the
recommendations of the Aaronson Report to introduce a GAAR targeted at
abusive tax avoidance schemes. The Tax GAAR was introduced by the
Finance Act 2013.
7. The GAAR, as this Bill would apply it with modifications, is designed
specifically to target only those NICs arrangements which are regarded as
abusive. The rules will consider whether an arrangement is abusive, by
2
DPRR/13-14/84
considering whether the arrangement can reasonably be regarded as
reasonable - and if it cannot, then any resulting NICs advantage would be
counteracted by making adjustments to charge the right amount of NICs.
Oil and Gas Workers on the UK Continental Shelf
8. At Budget 2013 the Chancellor announced that the Government would
strengthen legislation in respect of offshore employment intermediaries.
9. The Bill amends the power in section 120 of the Social Security
Contribution Act 1992 (SSCBA) to enable the Treasury to make
regulations to create a certification system so that, in the cases where the
offshore employer of the relevant workers is fulfilling the filing and payment
responsibilities as agent of the secondary contributor licensee, a certificate
can be issued confirming payment.
Partnerships Review – new provision for deferred profits under the Alternative
Investment Fund Managers Directive (AIFMD)
10. As part of the partnerships review consultation carried out between May
and August 2013, HMRC received further information about a tax issue
that can arise from the interaction of the AIFMD and the existing
partnership tax rules. For example, a hedge fund manager may under the
requirements of the AIFMD only have access to partnership profits after a
deferral period of three to five years, but would under existing rules be
liable to tax on the profits in the year when they arise. HMRC has
proposed to set up a new statutory mechanism to address this issue and
changes are required to be made to Class 4 NICs legislation to facilitate
the proposed introduction of the mechanism. New tax legislation will also
be required and will be subject to the Finance Bill 2014 process.
3
DPRR/13-14/84
Partnership Review – new provision for treating certain individuals as
employed earners of the LLP
11. At Budget 2013 the Chancellor announced that the Government would
consult on removing the presumption of self-employment for LLP
members, to tackle the disguising of employment relationships through
LLPs in certain specified circumstances. Subsequent to this consultation
HMRC was informed of a proposed scheme to avoid this measure.
12. Changes to income tax legislation will be introduced in Finance Bill 14 and
will take effect from April 2014. In order to implement this measure for
NICs purposes in a way that will counteract the proposed avoidance
scheme a power will be included in the NICs Bill to make the necessary
statutory changes by way of regulations.
TERRITORIAL EXTENT
13. NICs are a reserved matter (or an excepted matter in Northern Ireland) in
each of the devolved administrations; hence the provisions in this Bill
relating to NICs will extend to England, Scotland, Wales and Northern
Ireland.
14. Northern Ireland has separate sets of primary legislation that replicates the
legislation for Great Britain although the Social Security (Contributions)
Regulations 2001 cover both Great Britain and Northern Ireland, unless
otherwise stated. The relevant Acts are the SSCB(NI)A and the SSA(NI)A.
The Social Security Contributions (Transfer of Functions, etc) (Northern
Ireland) Order 1999 transferred responsibility for NICs in Northern Ireland
from the Department of Health and Social Security (Northern Ireland) (now
the Department of Social Development) to Treasury Ministers and the
Board of Inland Revenue (now HMRC). The Treasury and HMRC
therefore have UK-wide responsibility for NICs.
4
DPRR/13-14/84
PROVISIONS FOR DELEGATED LEGISLATION
Clause 4 – How does a person who qualifies for the employment
allowance receive it?

Powers conferred on: HMRC

Powers exercisable by: administrative arrangements

Parliamentary procedure: none
15. Clause 4(1) provides for arrangements to be made by HMRC for the
purpose of administering deductions of the employment allowance.
16. Subsection (4) provides some examples of the arrangements HMRC can
provide for including that deductions must be made at the earliest
opportunity in the tax year, the cases that deductions cannot be made, to
place limits on the amount of deductions and the form, manner and
information required by HMRC before deductions can be made. The
arrangements will take the form of guidance published by HMRC.
17. The arrangements will prescribe the process to be followed by persons
wishing to claim the employment allowance, in particular that they must be
made from a PAYE scheme, that where an employer operates more than
one PAYE scheme the employer must nominate which scheme against
which to make the deduction, and that only one PAYE scheme may be
nominated in the tax year.
18. It is appropriate to do this administratively as it sets out the procedure and
the arrangements HMRC will put in place to enable employers to claim
and deduct the allowance from their liability to pay secondary Class 1
NICs. The power does not allow HMRC to override any provisions in the
primary legislation and it will not affect the eligibility for the allowance, the
amount of the allowance nor the design of the scheme. It is therefore
considered unnecessary for them to be subjected to Parliamentary control.
5
DPRR/13-14/84
19. A draft of the administrative arrangements was published on 21 November
2013 and was available during the Commons Committee stage of the Bill.
Clause 5 – Power to amend the employment allowance provisions
 Powers conferred on: the Treasury
 Powers exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: affirmative resolution
Clause 5(1)(a)
20. Clause 5(1)(a) enables the Treasury to make regulations to increase or
decrease a person’s employment allowance for a tax year. Clause 1(2)
provides that a person’s employment allowance for a tax year is either
£2000; or if less, an amount equal to the total amount of secondary Class
1 contributions liability due in that year.
21. The amount of the employment allowance is set against the background of
current economic considerations and the Government may wish to amend
it to reflect changing circumstances. As the scheme is not part of the tax
regime, there is not the regular opportunity to amend the allowance in the
Finance Bill, so were this power not included in the Bill there would need
to be additional primary legislation solely to cater for any increase or
decrease of the amount.
22. The Government does not consider that primary legislation solely to
amend the allowance is justified but wants to ensure that Parliament has
the opportunity to debate any change in the amount of the allowance.
23. Where the regulations decrease a person’s employment allowance the
regulations may not be made unless a draft of the instrument has been
laid before and approved by a resolution of each House of Parliament
6
DPRR/13-14/84
(clause 5(5), the “draft affirmative procedure”). It is considered that this
provides a suitable level of parliamentary scrutiny.
24. Where the regulations increase a person’s employment allowance they will
be subject to the affirmative procedure and will come into force when laid
unless within the period of 40 days the instrument is not approved by a
resolution of each House of Parliament (clause 5(6)). This ensures that
any increase in the allowance, which is to the benefit of employers, can
take effect whilst ensuring that there is proper parliamentary scrutiny.
Clause 5(1)(b)
25. Clause 5(1)(b) provides a power exercisable by the Treasury to make
regulations to add, reduce or modify the cases in which a person cannot
qualify for an employment allowance or in which liabilities to pay
secondary Class 1 NICs are excluded liabilities. It will enable the Treasury
to make changes to sections 2 and 3 and Schedule 1 of the Act.
26. Clause 2 sets out cases in which a person cannot qualify for an
employment allowance for a tax year and the cases in which liabilities to
pay secondary Class 1 NICs are “excluded liabilities” i.e. liabilities that
cannot be taken into account when considering the total amount of liability
to secondary Class 1 NICs which counts towards the allowance.
27. Clause 3 provides that where two or more companies or two or more
charities are connected with one another, only one may qualify for the
employment allowance. Schedule 1 sets out the rules for determining if
two or more companies or two or more charities are connected. The
connected persons rule is aimed at preventing abuse of the maximum
employment allowance for a tax year.
28. Clause 3 and Schedule 1 have been drafted to take account of the
particular circumstances in which persons may be connected with each
other. It contains detailed rules, largely based on a modified application of
7
DPRR/13-14/84
the main connected rule for income tax, but also contains a specific rule
for charitable trusts to reflect the large number of charities which are
trusts, based on section 5 of the Small Charitable Donations Act 2012.
Nevertheless, it remains possible that some persons may exploit the rules
by using companies and charities which are in fact connected and
managed by a small number of individuals, yet find a way round the
connected persons rule as drafted. Conversely, it may be that the rules
prove to be too harsh in practice. It will only be possible to identify
whether the rules as drafted meet their aim once the scheme is running
and HMRC has been able to monitor companies’ and charities’ behaviour.
The power will enable the Treasury to adjust the rules to ensure they are
set at the right level.
29. Regulations under clause 5(1)(b) are subject to the draft affirmative
procedure (clause 5(5)). It is considered appropriate because the effect of
regulations could limit those who are eligible for the allowance or the
amount of secondary liability that can be taken into account for the
purposes of the allowance and any tightening or loosening of the
connected persons rules will have consequences for companies and
charities and their eligibility for the allowance, so that the draft affirmative
procedure is justified.
Clause 5(2) and (3)
30. Clause 5(2) and (3) prescribe that section 175(3) to (5) of the SSCBA
applies to the powers to make regulations conferred by clause 5. Section
175(3) provides for regulations to make either the same provision for all
cases or different provision for different cases or classes of case. Section
175(4) provides that any power to make regulations includes a power to
make incidental, supplementary, consequential or transitional provisions
as appear expedient.
31. The purpose of subsections (2) and (3) is to allow for provision to be made
to have different rates of the employment allowance for different groups of
8
DPRR/13-14/84
employers, if necessary. It is considered appropriate that the general
regulation powers in the SSCBA apply to the employment allowance to
enable the allowance to be fully integrated into the NICs scheme.
Clause 7 – Retention of records
 Amendment to powers conferred on: the Treasury
 Powers exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: negative resolution
32. Clause 7 amends the power in paragraph 8(1) of Schedule 1 to the
SSCBA and the SSCB(NI)A to make regulations relating to the retention of
records to include purposes connected with the employment allowance.
33. Regulations will not be made using the amended power as the
amendments have been made in the Bill. However, as the employment
allowance is a new feature of the NICs scheme it is important that the
Treasury is able to manage the scheme and prescribe the records that
must be maintained relating to the claim for the allowance. It is considered
that the negative resolution procedure is appropriate as the power will be
used to prescribe a practical arrangement of the employment allowance.
Clause 9(3) – New section 9A(4) SSCBA: Power to add an age group and
specify the percentage rate of secondary Class 1 NICs which is to apply
to them
 Power conferred on: the Treasury
 Power exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: negative resolution
34. Clause 9(3) introduces new section 9A to the SSCBA. New subsection
9A(4)(a) enables the Treasury to make regulations to add an age group to
those in respect of whom a reduced rate of secondary Class 1 NICs
9
DPRR/13-14/84
applies (“the age-related secondary percentage”) and to specify what that
reduced rate is. New subsection 9A(5) sets out that the percentage rate
specified must be lower than the secondary percentage otherwise applying
in respect of that age group.
35. New subsection 9A(4)(b) enables the Treasury to make regulations to
reduce, or further reduce the percentage rate specified in respect of an
age group to whom the age-related secondary percentage applies.
36. The age-related secondary percentage applying to earnings paid to or in
respect of employees under the age of 21 has been set against the
background of current economic considerations, and the Government may
wish to extend the scope of the reduced rate to reflect changing
circumstances. As NICs are not part of the tax regime, there is not the
regular opportunity to amend the rate in the Finance Bill, so were this
power not included in the Bill there would need to be additional primary
legislation to reduce the rate of secondary class 1 NICs payable to
specified age groups.
37. As the effect of the power would be either to extend a relief from
secondary Class 1 NICs to more employers or otherwise to reduce or
further reduce the rate at which secondary Class 1 NICs are calculated,
this being below such secondary percentage as would otherwise apply,
the Government considers that the negative procedure is appropriate in
these circumstances.
Clause 9(3) – New section 9A(7) SSCBA: Power to set an upper
secondary threshold in relation to an age group in order to limit the
amount of earnings to which the age-related secondary percentage will
apply
 Power conferred on: the Treasury
 Power exercisable by: regulations made by statutory
instrument
10
DPRR/13-14/84
 Parliamentary procedure: affirmative resolution
38. Clause 9(3) introduces a new subsection 9A(7) to the SSCBA which
provides a power exercisable by the Treasury to make regulations to set
for every tax year an upper secondary threshold in relation to an age
group to whom an age-related secondary percentage applies and to
specify the amount of that threshold for a tax year. New subsection 9A(8)
provides that subsections (4) to (6) of section 5 of the SSCBA are to apply
to the power at new subsection 9A(7) for the purposes of prescribing
equivalents to the upper secondary threshold for earners paid otherwise
than weekly.
39. New subsection 9A(9) provides that in so far as an upper secondary
threshold has been provided in respect of an age group, and where
earnings paid to or in respect of that age group exceed that upper
secondary threshold, the secondary percentage, which is currently 13.8%,
will apply.
40. As the level of an upper secondary threshold will be used to determine to
what extent the lower age-related secondary percentage will apply to the
earnings of a specified age group, the Government may wish to alter the
level at which a threshold is set to reflect changing circumstances. As
NICs are not part of the tax regime, there is not the regular opportunity to
amend the level of an upper secondary threshold in the Finance Bill, so
were this power not included in the Bill there would need to be additional
primary legislation to alter the amount of the threshold when required.
41. In so far as it represents a decrease to an upper secondary threshold
previously set, the use of the power at new subsection 9A(7) will limit the
amount of earnings to which the age-related secondary percentage will
apply and mean that employers will be liable to pay the higher secondary
percentage rate on more earnings. It is therefore considered that the draft
affirmative procedure provides the appropriate level of parliamentary
11
DPRR/13-14/84
scrutiny, affording each House of Parliament the opportunity to debate the
level at which an upper secondary percentage is set.
Clause 11 – Power to modify application of the GAAR to NICs
 Power conferred on: the Treasury
 Powers exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: affirmative or negative resolution
42. Subsection (1) of this clause provides that, where there has been a
change to the tax GAAR that does not apply in relation to NICs (“the tax
only modification”), the Treasury may make regulations to:

Apply the tax only modification to NICs with or without modifications;

Make provision for NICs that corresponds to the tax only
modification; and

Make consequential changes to the GAAR in relation to its effect on
NICs or changes that are supplementary or incidental to the tax only
modification.
43. Subsection (2) provides that the regulations can amend other legislation,
make consequential, incidental, supplementary, transitional, transitory or
saving provision and make different provision for different cases, purposes
or classes of NICs.
44. The purpose of applying the tax GAAR to NICs is to ensure that where
there are NICs arrangements that are abusive the NICs advantage that is
obtained can be counteracted. In order to ensure that the tax and NICs
GAAR apply the same criteria and are administered in the same way the
Bill extends the tax GAAR to NICs with the necessary modification. The
Tax GAAR is set out in Part 5 of the Finance Act 2013.
45. It is possible that the tax GAAR may be amended once it has been in
operation. Any amendments to the tax GAAR will be made in primary
12
DPRR/13-14/84
legislation using the annual Finance Bill. Where a modification is made to
the tax GAAR that does not apply to NICs it would mean that any changes
to the NICs GAAR would require a Programme Bill.
46. The power in clause 11(1) would enable the Treasury to make regulations
by applying tax-only provisions to NICs or making corresponding provision
or to make such other provision in consequence of, or in order to
supplement or make provision incidental to, tax only changes as is
appropriate. Whilst the power appears to be broad its scope is limited in
that it must follow what is done for tax and can only be used where a
modification has been made to Part 5 of the Finance Act 2013.
47. The power will be used if there is a tax only modification to make the
modifications work for NICs. It may be used to make corresponding
provision for NICs if amendments are made to the tax GAAR providing
additional detail for particular taxes. It may be that amendments are made
to set out the mechanics of how adjustments are to be made in respect of
tax which might require consequential amendments to other tax provisions
and to which corresponding provisions will be required for NICs.
48. Without the power it would not be possible to make the NICs changes
which could result in the tax and NICs elements of the GAAR being out of
line for many months and potentially several years whilst a vehicle is
sought to make the amendments in primary legislation.
49. Regulations under clause 11 which amends or repeals a provision of
primary legislation will be subject to the draft affirmative procedure (clause
11(4)). HMRC considered it is appropriate that this power is exercised by
draft affirmative resolution where it amends primary legislation. Any other
statutory instrument made under this provision which do not amend
primary legislation is subject to the negative resolution procedure.
13
DPRR/13-14/84
Clause 12 – Oil and gas workers on the continental shelf: secondary
contributors etc – power to make provision as to issue of certificates to
secondary contributors
 Power conferred on: the Treasury
 Powers exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: negative resolution
50. Clause 12 amends the power in section 120 of the SSCBA to enable the
Treasury to make regulations for and in connection with the issuing of
certificates to secondary contributors so that, in the cases where the
offshore employer of the relevant workers is fulfilling the filing and payment
responsibilities as agent of the secondary contributor licensee, a certificate
can be issued confirming payment.
51. As it is important that the Treasury is able to manage NICs by prescribing
contributors it is considered appropriate that they are given the power to
make further prescription.
52. Exercise of these powers is subject to the negative resolution procedure
as it amends section 120 SSCBA which is already subject to the negative
procedure. This is also consistent with existing powers in the SSCBA and
SSCB(NI)A to specify who is liable to pay NICs by reference to residency
and presence (section 1(6)) and employer characteristics (sections 7(2)),
which are subject to the negative resolution procedure according to
section 176 SSCBA and section 172(9) SSCB(NI)A.
53. Regulations relating to both the extension of the power within the NICs Bill
and those which bring the changes in through existing vires were
published in draft on 21 November 2013. This meant the regulations were
available for scrutiny at the Commons Committee stage of the Bill. The
regulations have also been made available for a full technical consultation.
14
DPRR/13-14/84
Clause 13 – Class 4 NICs: power to modify (with retrospective effect) the
way in which liabilities for Class 4 NICs contributions of partners are
determined
 Amendment to powers conferred on: the Treasury
 Powers exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: affirmative resolution
54. This clause confers a power on the Treasury to modify the way in which
the liability for Class 4 NICs contributions of partners in firms (including
limited liability partnerships) is determined. The power may only be
exercised when a provision of the Income Tax Acts relating to partners is
passed or made, and the Treasury considers it appropriate to modify the
Class 4 NICs position taking into account that tax provision. The power is
exercisable retrospectively, but only to the beginning of the tax year in
which the regulations under it are made.
55. The power is intended to be used to modify how the Class 4 NICs liability
of partners in Alternative Investment Fund Managers operating through a
partnership (“AIFM partners”) is calculated. This modification will
complement a new statutory mechanism to address a particular tax issue
that can arise from the interaction of the AIFMD and the existing
partnership tax rules. For example, a hedge fund manager may under the
requirements of the AIFMD only have access to partnership profits after a
deferral period of three to five years, but would under existing rules be
liable to tax on the profits in the year when they arise.
56. Finance Bill 2014 is likely to include new income tax legislation for the
purposes of the mechanism which will cover profits that will be deferred in
accordance with the AIFMD. This proposed legislation will allow members
to allocate the deferred profits to a notional member of a partnership
(including a LLP) and for income tax to be payable on that basis.
15
DPRR/13-14/84
57. The detail of the rule is being refined but it is intended that liability to
account for Class 4 NICs will not arise when the profits are allocated to the
notional partner, but will arise if and when the profits vest with an individual
partner after the deferral period. The precise wording of the NICs
legislation to achieve this will be dependent on the tax legislation which will
not be finalised until Finance Bill 2014 has received Royal Assent. As
such, it is not possible to include the necessary NICs provisions in the
primary legislation in this Bill.
58. Similarly, the precise scope of the tax legislation is still subject to
consultation and will not be known until Finance Bill 2014 has received
Royal Assent. As such, it is expedient that the power is framed in a way
which allows the regulations to cover all fund management partnerships
affected by the tax provisions, including where the scope of the tax
provisions is amended in the future.
59. It is, however, considered highly desirable that the closely related tax and
NICs provisions take effect at the same time, to provide certainty and
avoid any tax or NICs consequences that may arise from any
misalignment between the two. Hence, it is expedient that the NICs
changes be made immediately after the Finance Bill 2014 has received
Royal Assent and to have retrospective effect to 6 April 2014, to cover the
entire tax year 2014-15 in the same way as the tax provisions. It is
considered that the only realistic way of achieving this result is for the
necessary modifications to the NICs legislation to be made by regulations
under the power conferred by this clause.
60. As regulations made under the power will be based on tax provisions
included in Finance Bill 2014, the draft regulations were published on 10
December 2013 alongside the draft tax clauses following the autumn
statement made by the Chancellor. As the power under this clause is
exercisable retrospectively, and as the draft regulations were not available
at the time of the Commons Committee debate of this Bill, it is considered
appropriate that the regulations be made under the affirmative procedure.
16
DPRR/13-14/84
Clause 14 – Limited Liability Partnerships: power to prescribe (with
retrospective effect if reflecting tax legislation) the circumstances in
which a person is to be treated as an employed earner employed by an
LLP.
 Power conferred on: the Treasury with the concurrence of the
Secretary of State for Work and Pensions for Great Britain and
the Department for Social Development for Northern Ireland
 Power exercisable: by regulations made by statutory
instrument
 Parliamentary procedure: affirmative resolution if the
regulations have retrospective effect, otherwise negative
resolution
61. Clause 14 is in part an anti avoidance provision to prevent the disguising
of employment by membership of an LLP and to counter schemes that
would otherwise avoid its effects. Clause 14(2) inserts new section 4AA
into the SSCBA. New section 4AA(1) creates a power to prescribe the
circumstances in which for NICs purposes, a person (E) (including a
member of a LLP) is treated as an employed earner of the LLP and,
payments etc. made to E or a third party are treated as E’s earnings from
E’s employment with the LLP. New section 4AA(2) creates a power to
modify the definition of employee and employer in Parts XI to XIIZB of the
SSCBA so that E is an employee and the LLP is the employer for the
purposes of the legislation governing statutory sick, maternity, paternity
and adoption payments.
62. New section 4AA(3) creates a power to make provision to reflect
amendments made to the Income Tax Acts relating to LLPs or their
members for the purpose of assimilating the law relating to income tax and
contributions under Part I of the SSCBA. This power, which is similar to
the power in section 4A(9) SSCBA, can only be exercised to reflect, for
contributions purposes, an amendment to the Income Tax Acts relating to
LLPs or their members. Such amendments will generally be made by
17
DPRR/13-14/84
Finance Acts which have retrospective effect to the beginning of the tax
year so any corresponding provisions for contributions purposes made
under this power are likely to also be made with retrospective effect and as
such will require the affirmative procedure (see paragraph 65 below). In a
case where the power is not being exercised retrospectively, it can still
only be exercised after the passing of the Finance Act, to mirror those
provisions.
63. The corresponding tax provisions to define E and treat the payments etc.
received by E or a third party as E’s general earnings from the LLP subject
to income tax under the employment income Parts of the Income Tax
(Earnings and Pensions) Act 2003 will not be finalised until Finance Bill
2014 has received Royal Assent (which is expected in July 2014). In order
to ensure that the NICs provisions properly reflect and compliment the tax
provisions it is not possible to set out in the NICs Bill the precise
circumstances in which E will be treated as an employed earner of the LLP
and what payments etc. will be treated as E’s earnings from that
employment. This is why a power has been included in the Bill for the
precise circumstances to be set out in regulations.
64. When the tax provisions receive Royal Assent they will have retrospective
effect to 6 April 2014. Clause 14(3) inserts new section 4AA into section
4B of the SSCBA which allows the regulations to be made with
retrospective effect where they implement a provision for NICs purposes
that reflects a provision of the Income Tax Acts that has been passed or
made so as to have retrospective effect. The same power to make
regulations with retrospective effect exists in relation to the regulation
making powers in sections 3 and 4(6) of the SSCBA. The power to make
regulations with retrospective effect is limited to circumstances where
retrospection is necessary to mirror retrospective changes that have been
made to corresponding tax legislation. This is needed to maintain
coherence between the tax and NICs regimes. It is intended that the
power in clause 14(3) to make retrospective regulations will be used to
18
DPRR/13-14/84
make regulations on Royal Assent of the Finance Bill 2014 with
retrospective effect to 6 April 2014.
65. Where the regulations made under this power are to have retrospective
effect they will be introduced by the affirmative procedure to enable full
Parliamentary scrutiny.
66. Clause 14(4) inserts a new subsection in section 10 of the SSCBA to allow
the Treasury to make Class 1A contributions payable on benefits in kind
paid by the LLP to E. Without specific regulations to this effect Class 1A
contributions may not be payable on these benefits in kind because they
would be from a deemed “employed earner’s employment” rather than an
actual “employed earner’s employment” and may therefore not come
within section 10(1).
Clause 18 – Certain orders and regulations in respect of Northern
Ireland
 Amendment to powers conferred on: the Secretary of State, the
Treasury or the Commissioners for Revenue and Customs
 Powers exercisable by: regulations made by statutory
instrument
 Parliamentary procedure: negative resolution
Clause 18(3)
67. Clause 18(3) amends the procedure for making certain instruments under
the SSCB(NI)A. Regulations made under section 117 SSCB(NI)A relating
to mariners and airman are to be subject to the negative resolution
procedure where they are made consequential on provisions relating to
the destination of contributions into the National Insurance Fund under
section 142(7) of the SSA(NI)A.
19
DPRR/13-14/84
68. Subsection (3) also applies the negative resolution procedure for
consolidating regulations and regulations which replace provisions of
previous regulations with new provisions to the same effect relating to the
annual review of contributions, powers to alter contributions with a view to
adjusting the level of the National Insurance Fund and the power to alter
primary and secondary contributions.
69. It is considered appropriate that the power is exercisable by negative
resolution as it brings the position in line with the equivalent provisions in
the SSCBA and ensures consistency when making regulations for
Northern Ireland and Great Britain.
Clause 18(5) and (6)
70. Clause 18(5) and (6) amends the power in section 165 of the SSA(NI)A.
As originally enacted section 165(3) provided for any power conferred by
the Act to make regulations or orders to be exercisable by statutory rule for
the purposes of the Statutory Rules (Northern Ireland) Order 1979.
Section 165 was amended by paragraph 10 of Schedule 4 to the Tax
Credits Act 2002 so that section 165(3) now reads “Any power conferred
by this Act on the Department or the Lord Chancellor to make regulations
or orders is exercisable by statutory rule for the purposes of the Statutory
Rules (Northern Ireland) Order 1979 (NI 12).”
71. This change has left regulations and orders made by the Secretary of
State in a state of limbo in that they are neither statutory rules nor statutory
instruments; section 165(11A) of the SSA(NI)A provides for the Treasury
and HMRC to make regulations or orders under the Act by statutory
instrument, but not the Secretary of State. For example the power to make
orders giving effect to reciprocal agreements with countries outside the UK
in section 155 of the SSA(NI)A is exercisable by the Secretary of State.
The Secretary of State could still make an order under section 155(1) but
such an order would be neither a statutory rule nor a statutory instrument.
The power is being amended so that it is clear what form instruments
made by the Secretary of State should take.
20
DPRR/13-14/84
HM Revenue and Customs
9 January 2014
21