Clause 9

National Insurance Contributions Bill – in a Public Bill Committee at 9:15 am on 9 December 2010.

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

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

This is a simple set of points. The clause deals with the retention of records by those making applications under part 2 of the Bill. As I understand it, it is designed to ensure that the burden of retaining records is fairly light touch, but it is still quite a long clause. There are no explicit penalties for failure to retain records, although I assume that the reference to schedule 4 of the 2001 regulations means that the suite of penalties that might apply in other cases will not apply in this case.

I also assume that the wording of subsection (4) means that electronic records are sufficient. I should be grateful if the Minister could clarify that and also explain why the period of three years has been chosen for the retention of records. Many companies may find it slightly inconvenient to retain records for that length of time. Obviously, we want to strike the balance so that there is good record keeping but the requirement is not burdensome for businesses, because there are costs involved in the administration of the paperwork involved in those schemes. If the Minister could clarify those points, I would be grateful.

Photo of David Gauke David Gauke The Exchequer Secretary

On compliance, clause 9(5) relates to the powers in schedule 36 to the Finance Act 2008 that enable HMRC to check tax compliance, and it extends the powers in that schedule to enable HMRC officers to check compliance with the holiday legislation. That is rather similar to the debate—perhaps the word debate exaggerates the brief discussion that we had—on penalties on Tuesday afternoon. Essentially, the arrangements that apply for record keeping generally will apply in this context, as far as the NICs holiday is concerned. What we are careful to do in subsection (3) is ensure that the general NICs record-keeping requirement proposed for employees does not overlap with the requirements in relation to the NICs holiday in the clause. As far as any penalties are concerned, the general regime applies to national insurance contributions. There is not, therefore, a separate regime.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

There may be more that the Minister can discover on the point that I am looking at. Specifically, what are those penalties that may befall a company that goes through the application process and then, for some reason, does not keep its records in the form required? What are the potential suite of penalties that could befall applicants in that particular case? Obviously, they would be lighter than in other cases, given the disapplication of schedule 4 of the 2001 regulations.

Photo of David Gauke David Gauke The Exchequer Secretary

The point is that those are not new penalties. There are financial penalties for failing to keep records. On the hon. Gentleman’s specific point, electronic records can be sufficient and there is no need to keep paper records. As for the time period, it is always the case that there is a need for a time period in which to keep records that apply to the scheme. The EU state aid rules set a maximum amount that can be received over a three-year period, and that is why we have a three-year period for the scheme.

Chris Leslie rose—

Photo of David Gauke David Gauke The Exchequer Secretary

I will certainly give way for what I hope will be a lengthy intervention.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I can try, within the bounds of the latitude of the Chair. If it would help the Minister, I am happy with the points in his answer on the three-year rule. My concern is with the specific description of the nature of the penalties that may apply to applicants in this particular case, because the wording of the clause is such that it is slightly different from other penalties that apply in other national insurance arrangements. If it would help the Committee, I am more than happy for the Minister to write to us with more information on that point, if that is easier.

Photo of David Gauke David Gauke The Exchequer Secretary

As I said, there are financial penalties. There are fixed penalties for failing to keep records. If the hon. Gentleman would like the specific amounts, I am happy to confirm the details to him in writing, but as I said it is a matter of financial penalties in those circumstances.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I have some points about record keeping. I am sure that I am not alone among hon. Members in having constituents come to me with problems with HMRC, and indeed other institutions, because of a failure to keep records or bad advice from bookkeepers  or even, sometimes, accountants. I am concerned on this point because instructions about record keeping should be precise so that small business people, who are not necessarily sophisticated in administrative matters, know what they must do to keep proper records. I hope that HMRC will ensure that its records are correct, too. Again, I am sure I am not alone in having had a ping-pong exchange of correspondence in the past with constituents with small businesses and HMRC over a disagreement about information about something that has happened where proper records have not been kept.

Records must be kept by the business people concerned. Often small business people in, say, the building industry are not trained in administration—indeed, I am not a trained accountant, and I dread the thought of having to administer a small business myself—so we must provide clear instructions and advice about the requirements. On a different point, I may be a bit of a dinosaur but I like paper records as well as electronic records.

Photo of David Gauke David Gauke The Exchequer Secretary 9:30, 9 December 2010

Far be it from me to accuse the hon. Gentleman of being a dinosaur in either his love of paper records or his politics. I share his concerns about ensuring that the right type of record-keeping requirement is placed on small businesses. When the Finance Act 2008 was being passed, I suspect that I made similar points as a lead for the Opposition during the lengthy debates that we had on the subject. We must get those powers right, and the requirements placed on small businesses must be proportionate and reasonable.

It may help the Committee if I point out that the guidance on HMRC’s website—apologies to the hon. Member for Luton North, but it is on the website—clearly sets out the record-keeping requirements on businesses and employers in such circumstances. The hon. Gentleman is correct that we must be careful not to place undue demands on businesses, but HMRC needs to have accurate records in order to be able to monitor and ensure accurate compliance with our requirements.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.