Clause 143 - PAYE on notional payments: reimbursement period

Finance Bill – in a Public Bill Committee at 8:55 am on 17th June 2003.

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Question proposed, That the clause stand part of the Bill.

Photo of Stephen O'Brien Stephen O'Brien Conservative, Eddisbury

May I, too, add my congratulations to the two hon. Gentlemen on their elevation? I thought that office did not come any higher than Chairman of the Procedure Committee, so I am not sure how your further promotion could be possible, Sir Nicholas. We meet this morning following a decent number of hours in yesterday's parliamentary sitting, and we are bright eyed and bushy tailed.

The stand part debate on clause 143 deals with the change that allows employees a further 60 days in which to reimburse their employers. The clause is deregulatory and more equitable, and thus attracts our support. We are glad that the Government have listened to representations on this matter, particularly from the Chartered Institute of Taxation.

One further caution still resides with the Institute of Chartered Accountants, which welcomes the change but has asked whether the Paymaster General would respond to the consideration that it will not necessarily overcome all the problems arising from what used to be called section 144A of the Income and Corporation and Taxes Act 1988. One solution when repayment is not made within the 90-day period would be to treat the unpaid amount as a loan. Alternatively, an amendment could have been inserted to extend the 90-day period in appropriate circumstances to such a longer period as the Revenue may allow. As the Paymaster General will note, we have not proposed such an amendment and wish to gauge reaction by placing the matter on the record.

The Institute of Chartered Accountants has also suggested for tidying up purposes that the Treasury might want to give consideration to consistency across the provisions of the 1988 Act. The period for reimbursement is 90 days, but the notification period for share options under the enterprise management incentive scheme is 92 days and a three-month period could create some standardisation, either at 90 or 92 days. Naturally, it has requested 92 days.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I am grateful to the hon. Gentleman for welcoming the clause. His reaction has been very supportive. He asked two questions. The first one concerned whether the formal loan agreement is entered into so that the employee is obliged to repay PAYE to the employer. That will count as making good, so will remove the charge under section 222. Of course, if the loan is interest free, if interest is less than interest at the official rate or if the loan is subsequently waived, the beneficial loans and class 1A of the

national insurance legislation will apply. That is the clarification that he sought.

Secondly, he asked why the period was not 92 days. From the next tax year, if an employer makes a notional payment to an employee on 5 April, the 90-day period will expire before the employer's 6 July deadline for completing and submitting the taxable benefits form—P11D. That form can include details of amounts not reimbursed. The UK International Chamber of Commerce suggested that the 30-day deadline could be extended to 60 or 90 days, and the Confederation of British Industry also suggested 90 days.

Clause 143 shows that we accept those representations in full, and we believe that they fit well with the other legislation. The hon. Gentleman made a more general point about attitudes to legislation, and I would say that as always we keep such matters under review, and should it transpire that further changes would aid smooth operation, the Government would consider them. At present, the provisions are as far as we have been asked to go, and we believe that that is as far as it is necessary for us to go. I commend the clause to the Committee.

Question put and agreed to.

Clause 143 ordered to stand part of the Bill.