Clause 5 - Recovery of contributions, etc: Great Britain
National Insurance Contributions and Statutory Payments Bill
10:45 am
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Clause 5 aligns the periods of notice required for distraint action to recover national insurance contribution debt in England and Wales, and the application for summary warrant in Scotland, with those that apply for tax debt.
In this part of the Bill, we turn to measures concerning the recovery of NICs debt. Clause 5, and clause 6 for Northern Ireland, deal with the small minority—3 per cent.—of NICs that are not collected with tax. They are mainly the flat-rate class 2 contributions that are paid by the self-employed. The purpose of the clause is to align the Inland Revenue's procedures for recovering that type of NIC debt with those for recovering tax debts. Tax legislation and procedures have applied to debt recovery contributions collected with tax since the mid 1970s.
Perhaps I should briefly explain why we need the changes. First, given that all tax and contributions debts are recoverable by the Inland Revenue, there is no logic in having separate rules for a small proportion of cases. Secondly, situations can and do arise in which a person has both a tax debt and a class 2 contribution debt. As the legislation stands, it is not practicable to deal with both debts in a single action.
The current provisions were inherited from the Contributions Agency in 1999. Although the Social Security Contributions (Transfer of Functions, etc.) Act 1999 gave the Inland Revenue responsibility for recovering such debt, it did not change the legislative mechanism for the recovery action.
The changes are relatively straightforward. The period of notice for distraint action in England and Wales is changed from 30 days to seven, in line with the procedures for recovering tax debt and accepted good practice. The period of notice for application for a summary warrant in Scotland is changed from 30 days to 14, in line with the tax legislation and the procedures under the Debt Arrangement and Attachment (Scotland) Act 2002. The 30-day notice periods prescribed are out of line with tax procedure and legislation, and with best practice on the recovery of general debt.
Distraint action involves the seizure of goods for sale at auction if the debt is not settled. Where a debtor is determined, for whatever reason, not to pay, a 30-day notice of the action provides a more than ample opportunity to dispose of valuable goods that might otherwise be seized.
The clause makes two changes. It clarifies the legislation regarding the recovery of amounts due under personal liability notices and it provides for the alignment of the tax and contributions debt recovery provisions by regulations. Personal liability notices can be issued in respect of unpaid national insurance contributions to the former directors of companies that have been wound up. For the avoidance of doubt, the clause specifies that debts arising from personal liability notices are to be recovered in the same manner as the class 1 contributions to which the notices relate.
The final provision in the clause is a regulation-making power to allow tax legislation to apply to the recovery of such contributions. An equivalent power has existed since the mid-1970s for contributions collected with tax. This is a future-proofing provision designed to prevent misalignment from arising. It is necessary because most national insurance matters are outside the scope of the Finance Bill. Thus, if a future Finance Bill were to change the provisions governing the recovery of tax debt that needed to be mirrored in such contributions, separate provision would have to be made in a programme Bill. That would inevitably be delayed, as space in any Government's legislative programme is scarce.
I am happy to answer questions from members of the Committee, but I hope that they accept that it is sensible for employers to have one procedure, with which they are familiar, for the recovery of debt across all tax debts. The provision brings national insurance debt in line with tax debt, making a single, recoverable action. I hope that the Committee accepts the clause.