Good morning to those who have just joined us. We now resume our public sitting and hear evidence from the Treasury. Before I call the first Member, I remind all Members and witnesses that questions and answers should be limited to matters within the scope of the Bill. Please also recognise that we must stick to the timings in the programme order that the Committee has agreed.
The scope of the Bill is quite narrow. Essentially, the Bill introduces a new class 1A national insurance contribution on termination awards in excess of £30,000, and a new class 1A national insurance contribution on sporting testimonial payments over £100,000. Could Members and witnesses try to keep their comments focused on the scope of the Bill, which is not about general reform of national insurance?
Do any members of the Committee wish to declare any interests before we proceed?
I apologise to all members of the Committee for being late. Things have conspired against me!
I call the first panel. I remind the Committee that we have until 10.25 am for this session. Will the witnesses please introduce themselves?
Thank you. It is a pleasure to see you in the Chair, Ms McDonagh.Q
Minister, on publishing its report of
“Our independent review has demonstrated...that some will gain and others will lose from any change.”
Could you tell us who gains and who loses as a result of these proposals?
First, the most important point to make is that we have chosen only to apply national insurance contributions class 1A to employers’ national insurance contributions, not to employees, although I appreciate the argument that could be put forward that that will impact on the total settlement made to employees when an employer looks at the package they are to receive on termination. The evidence we have seen suggests that it will have a very limited impact on wages, which was a point that you raised on Second Reading, Mr Dowd—around 0.01% impact.
In terms of who will bear the cost, the vast majority of termination payments will be exempt. Around 80% of individuals receiving a termination payment will not be affected by the measure. There is already a generous threshold of £30,000, which compares very favourably internationally. There is no income tax payable before that point, and even with this measure, there will be no employers’ national insurance payable—it will only be on payments above that. Because of that, we anticipate that the proposals will affect higher income groups.
The best estimate that Her Majesty's Revenue and Customs and the Treasury have made is that it will impact the top two or three income deciles. It will have a very limited impact on low or middle-income earners.
Q Can you confirm that no distributional analysis has been undertaken of the impact of the new class 1A charge for employers on termination awards? Is that correct?
We wrote to the Committee about distributional analysis prior to the session. We said in that note that what we have done, and are able to do with the data we have, is to show that this would disproportionately affect higher and additional rate taxpayers. But due to data limitations, we cannot do the formal distributional analysis of the type that we would usually do with a full Budget policy costing. However, we are confident that it would affect the top two to three income deciles, as the Minister says.
Q I acknowledge your point, but the answer to the question is no; you have not done a distributional analysis, and you say you cannot do one because it is not pertinent or possible to do one.
Q Okay. May I go on to the issue of collection? The legislation does not set out the way in which the class 1A charge will be collected, stating that that will be covered by secondary legislation. Minister, do you accept the criticism from tax accountants that that is a break from practice and that it will be confusing for employers, as well as, for example, adding to administrative burdens?
No, we do not agree with that. I will let my colleague Raj, who perhaps has the greatest expertise from an HMRC perspective, speak to this in a moment, but the purpose of the policy is tax simplification and greater alignment with income tax. Our primary motivation is to simplify the tax code and to give greater certainty to taxpayers. We chose class 1A as the most logical class of national insurance on which to apply the charge, because it is the class that applies to benefits received by employees, and is paid by employers.
I know that, on Second Reading, you raised the question of whether we could have chosen an alternative class, or created a new class altogether. We chose not to create a new class altogether because that would have gone against the grain of what we were trying to do. Far from simplifying national insurance in a modest way, that would have made it more complicated. Class 1 national insurance contributions are somewhat different, because that is both employers and employees.
As I said in answer to your first question, we specifically chose to apply only employers’ national insurance in this situation, not employees’ as well, which, of course, we could have done. That would have simply been an additional charge that individuals had to pay. We chose not to do that. We gave it considerable thought and came to the conclusion that class 1A was the most logical one to apply this through. I think that has been widely recognised. I do not know whether Raj has anything to add.
The only thing I would add is that when there is a cash payment—a termination award—for income tax, it is currently collected through pay-as-you-earn. It is reported in real time and paid either monthly or quarterly, depending on the size of the employer. For a class 1A contribution, where it is a cash award, it will be reported and paid in the same way as pay-as-you-earn income tax.
The point there, just to emphasise it, is that the motivation is greater alignment with income tax. By bringing the two into the same manner of payment, we are simplifying, rather than adding further complexity. Had we created a misalignment, where one—income tax—was paid through PAYE and the other was paid separately, perhaps at the end of the tax year, we would not have served the purpose of the Bill.
Q I understand that class 1A charges will arise and be paid in real time, rather than after the tax year-end, as is the case with other class 1 charges. Given that we are talking about simplification, do you not accept that payment in real time would require additional boxes on the PAYE real-time information submission, and a new process by Her Majesty’s Revenue and Customs for monthly or weekly PAYE reductions for employers? Would that not place an administrative burden on employers that is not factored into the policy note produced by Treasury officials? It does not appear to be as simple as you are suggesting, in the round.
May I answer that for the Minister? The main point is that employers are already doing that for income tax. They already have to report and pay in near-real time, so it will not add much to what they already have to do for income tax.
Just to clarify one point, there will be instances when they will pay the class 1A termination award after the year-end, and that is when the termination award comprises a benefit in kind. For example, if an employee is allowed to keep a car for a specific period, that is a benefit in kind, and that will continue to be reported after the end of the year.
Q It seems to me that you are creating a different class within a class with these 1A contributions. They are still going be termed 1A contributions, but they will be treated totally differently and arise on different classes of stuff from current 1A contributions.
It is distinct from the others, but, as I said earlier, if the choice was about which of the classes is the most logical to apply this to, this would remain the most logical. If your argument is that because this is somewhat different, you could have created an additional class of NICs, you could have done that, but we took the view that that would have added more complexity than simply having a somewhat different situation within class 1A.
Can I add to what the Minister said? We are working to minimise any additional administrative burden there may be, but, as I said, because this is already being done by employers for income tax, any additional burden would be minimal. HMRC will make sure that guidance for employers is ready in good time, and it will also be talking to and consulting software providers about how to bring this about.
Q Currently, there may be employers out there who do not do anything on class 1A, because they do not provide any benefits in kind to employees. They will not change anything they do, but may now be liable for class 1A contributions done in this different, unusual class 1A way, just because you are bringing cash termination payments into class 1A contributions. Is that right?
Q On the impact on the amount that employees receive, your work tells us that mostly people in the top two or three income deciles will be affected—or disproportionately impacted, as you suggest. Have you quantified the total amount that employees will lose as a result?
I will ask Simon to answer in a moment, but it is not as simple as that, because that is being paid for by employers. As I said earlier, we have chosen not to apply both employer and employee national insurance contributions, so the employee will not pay anything directly. Your question cuts to, “If you were an employer looking at how much money you were willing to pay somebody as part of a termination, would you take into account the fact that the employer now has to pay 13.8% class 1A national insurance contributions?”
That is quite possible—we do not dispute that—but it is difficult to accurately quantify the proportion of employers that would pass that on to the employee. We know that it is a revenue-raising measure, and we expect—and the Office for Budget Responsibility has verified—that it will bring in around £200 million a year on an ongoing basis. Those facts speak for themselves. We will be raising additional national insurance revenue from employers, but it will be for employers to decide how much of that is passed to employees through the usual negotiations.
The only thing that I would add is that the OBR has chosen to model this as a 0.1% reduction in wages. There has been no further adjustment on top of that for redundancy payments or anything else. That is largely because it is uncertain, as the Minister said, how it would be distributed. It will depend a lot on the individual employer-employee relations whether it is taken as lower profit, wages or anything else.
Q If the Committee meets on Thursday, it would be useful if you could look and see if you have data on the number of business start-ups as a result of termination payments, because I am concerned about the impact there may be on business start-ups as a result of the reduction in termination payments received by employees. Do you see what I mean?
I certainly do not hold those figures. I have seen independent anecdotal surveys, but I do not know on what basis they have been drawn up. Clearly, as you allude to, a large number of small businesses are begun by people who have lost their job and have taken that as an opportunity to set up their own business.
To return to the facts of the Bill, we still have a very generous threshold of £30,000. However wealthy one is, losing a job is a very difficult time in life. It is not an experience that people want to go through, whatever income level they have, but that does compare favourably by international standards. A number of countries, such as the United States and Germany, have no threshold at all, so people would start to pay income tax and employment taxes from £1. Even with this change, our system will compare favourably with other countries that we would look to as competitors or countries that we think have sensible welfare safety nets.
Minister, can I pick up on the point about the threshold and international comparisons? You gave two examples, but you said in broad terms that we compare favourably. Can you expand on that a little bit and give the Committee more evidence?Q
Of course. It was raised on Second Reading that, as a country, our threshold has been frozen since the late 1980s. That raised the perfectly legitimate question: is this a sensible place at which to retain the threshold? We think it is. We did international analysis when making changes from the income tax perspective that were legislated for in the Finance Acts 2016 and 2017. As I said earlier, the threshold compares favourably with OECD countries and EU countries. A number of countries, most prominently Germany and the United States, have no threshold at all. We therefore think that the threshold is fair. It is also worth noting that there is a range of exceptions that cover important situations such as disability, to which it does not apply.
The threshold has been debated. In fact, it is not set out in this Bill at all but is set out, from an income tax perspective, in the Finance Act. It was debated at that point and, clearly, the House came to the conclusion that it was a sensible level that compared reasonably with international comparators. The Bill does not speak to that; it purely applies employer’s national insurance class 1A to the amount that is taxable from an income tax perspective, using the threshold that is set elsewhere in the Finance Act. If one wanted to return to that, one would return to it through a future Finance Bill but, as I say, it was debated at the time and the view of the House was that it compared favourably by international standards and was a sensible place to remain for the time being.
As Mr Dowd said, the origin of the reform comes from our asking the Office for Tax Simplification to review benefits including termination payments and to see if there are sensible ways in which we could simplify the system and create greater clarity and fairness. Making a change of this kind was one of its recommendations, which we have now taken forward from an income tax perspective and in the Bill. Simon, do you want to add anything about the process?
Not on the process, but may I add something on the international comparisons point? The analysis published by the OTS shows that approximately half of countries have no exemption at all for termination payments. We are also aware that there are other countries with no exemption for social security: Switzerland and Denmark, for example, have no threshold at all. That is quite a large number of countries that we would compare favourably with.
The only thing that I would add on the process is that it started with the OTS, but we have since consulted quite widely on the policy. We have spoken to more than 100 groups and individual representatives and have consulted on the draft legislation for the termination payments measure, so it has been widely considered by quite a range of groups.
Q That is very helpful. We have touched on the burden on businesses, but can you amplify further the warnings that have been given to businesses to prepare for this? How long have they had? Are you confident that businesses will be ready from day one?
I hope so. Both measures in the Bill have been in the public domain for a very long time. They were first announced in 2015; we published these parts of the Bill in December 2015 and they have been consulted on and restated in successive Budgets. From an income tax perspective, we legislated in the 2016 and 2017 Finance Bills, which have now come into law—one of them has been in place for two years. We spoke to a range of stakeholders through the consultation and the passage of the Finance Bills. From a business perspective, in the accounting community and, with respect to the second measure, in supporting bodies, these measures are anticipated and well expected and have already been put into place from the income tax perspective.
Q Thank you. It may appear pernickety, but given how much wage stagnation we have had, 0.1% is quite significant in terms of the overall wage increases—or lack of increases—that we have had in recent years.
May I push the Minister further on our discussion about the relationship between these measures and what occurs in other countries? The UK’s system for supporting those in unemployment is far less generous than in most other countries—surely we should take that into account. Will he confirm that he does not intend to use the door that the legislation leaves open to further varying down the threshold of £30,000? The Opposition argued for that door to be closed, but it has not been. Will the Minister confirm that the Government have no plans to further vary down the £30,000 threshold?
We do not have any plans to change the threshold. You are not correct in saying that that is a matter for this Bill; if one wanted to take it forward, it would be a matter for a future Finance Bill. If one wanted to change the threshold, it would need to be done via an affirmative statutory instrument, and there would be every opportunity for the House to scrutinise it, debate it and vote on it at that point. However, we have no plans to change the threshold.
Q I am grateful to the Minister for those comments, but he has just confirmed the situation, which is that legislation that this House has passed leaves open that possibility. Varying down the level could be done through a statutory instrument, rather than requiring an Act.
Q Thank you; the point is clear. I appreciate that clarification.
I have questions about testimonials, as does the SNP spokesperson, the hon. Member for Aberdeen North, but I am sure we will come back to them later. My final question for now is about the real-time approach to payment of NICs. What kind of communication exercise will be undertaken with those who may be affected? I appreciate Mr Nayyar’s comments about ongoing discussions with software providers and others, but concerns have been expressed that this remains something that could be viewed as an administrative burden. The view is that, currently, the system is not set up to accept those payments. Can we have an indication of the communications that will be provided to ensure businesses are aware of this and not concerning themselves unnecessarily?
I will take this. HMRC has regular stakeholder events with tax professionals and software providers in which we will be communicating how this will happen. We will be issuing guidance in due course to explain what we would like employers to do and what they need to be aware of. We will be supplying specifications for third-party software providers about what changes they need to make to their software, so all of that will be ongoing.
To add to that, the purpose of bringing the Bill forward at this moment is that, if we can secure passage through Parliament and gain Royal Assent, there will be good time for that communication and for employers and software providers and so on to make the necessary changes before the start of the next tax year.
Q It is a privilege to serve on the Committee under your chairmanship, Ms McDonagh. I seek some clarification from the Minister in respect of some of his earlier responses. When explaining why the Bill has been brought forward, you mentioned clarity, fairness, consistency and international comparators, but it is also an issue of closing a tax loophole, is it not? Can you clarify the particular point that was made on Second Reading that terminations were
“subject to different income tax and national insurance treatment” and that had allowed a
“small number of well-advised employers to disguise final payments as compensatory termination awards that benefit from a national insurance charge exemption.”—[Official Report,
Do some well-informed employers see this as a means of avoiding paying tax and a way of giving a bonus to an employee on a short-term contract, thus also avoiding PAYE income tax?
Common examples we have seen are when an employee may have been due payment in lieu of notice, but they reach an agreement with their employer whereby the contract is terminated and, instead, they get a compensation award for damages for breach of that contract. That is taxable over £30,000 but it would have been entirely NICs-free. The Bill disincentivises that kind of manipulation by the very well advised.
Choosing only to apply employer’s national insurance disincentivises the employer from taking that action, without doing what one might have done by going further and creating a further cost to the employee.
Q Can you not make an estimate of how much the Treasury has lost? You said in your earlier answer that it would generate £200 million in revenue. I also saw an earlier note that said it would raise £485 million for the Treasury by 2020-21. Is it fair to say that £200 million is being lost per year?
To explain the difference between those two figures, the £485 million figure includes the impact of the income tax changes that have already been passed that were part of a package of measures. There are two different sets of changes. The first set—the income tax changes—simplified the rules to make it harder to manipulate payments. The NICs bit, which we are now taking forward, aligns the NICs treatment to remove the incentive to do what we were trying to stop through income tax in the first place. The £200 million figure refers to the yield just from the NICs element of this—the bit that we are discussing today.
It is a pleasure to serve with you in the Chair, Ms McDonagh. There is concern among trade unions that this means Q downward pressure on the amount received by people losing their jobs, who are, by definition, in a time of need. What are your comments on that?
I tried to answer that earlier. We all understand that, regardless of income, losing your job is a very difficult period in your life. People of all income levels can live to their income and have commitments and so on. I do not for one moment underestimate the difficulty that that situation presents to individuals and their families. However, this measure is targeted at higher earners. We have the £30,000 threshold, which takes out the majority of termination payments. Around 20% of those individuals receiving a termination payment will be affected by this, so 80% will not be affected.
Those who are affected will be individuals in the higher income brackets, as we said earlier—those in the top two or three income deciles. They will be higher rate or additional rate taxpayers. I do not diminish the fact that for higher rate taxpayers, losing your job is a very difficult period in your life which puts all manner of pressures on you and your family. It is worth noting, at least, that this is a measure that is unlikely to impact those on lower incomes.
As I said, we have consulted on this and I believe that they took part. They have had an opportunity to have their views known and listened to by the Treasury, as have business groups.
Q Moving on to sporting testimonials, I am not somebody who goes to a huge number of live sports matches of any kind. How much do people generally pay for a ticket to a sporting testimonial?
There is no easy answer. There is immense variation in events; they vary from a sporting testimonial at Wembley stadium for a premiership footballer to ones at my local football club in Newark for a player who has retired after a 10-year career. You see a complete range of prices for sporting events. We have evidence on the amount raised by the average sporting testimonial that is affected by the Bill from a piece of work that HMRC and the Treasury did in 2013. I believe it was £72,000. Obviously, many much smaller testimonials go below that, such as the one I have just described in the small club in my constituency. Finding the evidence on more substantial testimonials is not easy, because there is no central point of collection for it, but after doing a trawl for evidence in the public domain, we came to the conclusion that the amount is about £72,000 a year. As you will probably have seen, there is a threshold in the Bill of £100,000, so the vast majority of sporting testimonials will not be caught by this measure.
Q Are the ticket prices for the ones that are over £100,000, because they are likely to be caught, normally fixed, or are they done on a donation basis?
Again, there would be a lot of variation. The other point I would make is that not all sporting testimonials will be affected by this Bill. We are talking about only non-contractual, non-customary sporting testimonials. Contractual and customary sporting testimonials are already fully taxable and NIC-able. Indeed, the income tax treatment of the non-contractual, non-customary sporting testimonials has already been legislated for, and it is in operation.
Q I have a question about the consistency of the language in parts 1 and 2. Part 1 defines the amount received in relation to the income of the earner under section 403 of the Income Tax (Earnings and Pensions) Act 2003, whereas the sporting testimonial section, instead of defining it on the basis of an ITEPA category—I think section 226E is the key one for sporting testimonials—talks about about general income. It does not define it in terms of the ITEPA eligibility threshold. Why is there a difference in language between the two parts of the Bill? When part 2 talks about general earnings, does it actually mean ITEPA section 226E?
Q This is the last question from me. I have tabled an amendment about the Exchequer providing a report on the impact three years after the Bill comes into force so that we are aware of whether it has raised the £200 million a year that the Treasury suggested it would. I do not have a huge amount of success in getting amendments accepted, so I wonder whether the Minister and his team would provide that report, even if they do not accept my amendment?
If we have not already done so. Sometimes HMRC will already have commissioned research on how a policy has worked out, and we can then just explain that that has happened and the impact of it.
The £200 million is for termination payments. As for sporting testimonials, we believe that this measure will raise a very small amount of money. Our motivation is to ensure clarity by placing the tax situation on the statute book, and to ensure fairness between sportspeople who have testimonials, rather than to raise significant sums of money. The OBR has certified that the effect is negligible, which means less than £3 million, but it could be significantly less than £3 million.
Q A lot of sporting testimonials at all levels are used to raise money for charities and good causes, with either all or some of the proceeds going to local or national charities. How do you expect these measures to impact on charitable giving through sporting testimonials?
That is a good question. We do not think it will have a material impact. If you are a sportsperson who wants to give all or part of your testimonial receipts to charity, there are two options available to you. First, you could use our very generous system of payroll giving, which is without limit. Your employer, which in this case may well be the sporting testimonial committee, could register for that and take advantage of it. If you had not done that, and the receipts came to you as an individual, you could choose to make a donation and use gift aid at a later date, and take advantage of what by international standards is a very generous relief. We do not think there will be an impact on the receipts that charities receive from some of these testimonials.
Q I should like to refer back to our discussion on termination payments. I am perplexed, because I thought the panel contended that it was unclear how many people would be affected by those measures, yet the Exchequer’s figures—the Minister referred to them—project a potential increase in revenue of £210 million. That must be modelled on the basis of the new income tax incidence, and must assume that at least some of the people affected will be drawn into the new employer NICs. Surely we have some indication of how many people will be caught by this measure. Perhaps members of the Committee could receive a letter confirming that, but I wish to push the panel a little more. If there is an estimation of the revenue impact, we must roughly know how many people will be affected.
I think there are two questions there, and you are asking a different question from the one asked earlier. You are asking how many individuals or employers are likely to have to pay employers’ national insurance contributions on their termination payments, but the earlier question was about the impact on the amount of money that goes to individuals, and whether we have modelled that. My answer to that second question was that that was very uncertain, because it will depend on the behaviour of the employer, and to what extent they pass that cost on to the employee. We think that around 72,000 termination payments are likely to incur employers’ national insurance contributions; we have modelled that. The more difficult question, to which there is no accurate answer, is about how employers will behave in every case, and whether they will choose to pass all or some of the 13.8% on to the employee in the package they provide.
Q Thank you. I appreciate that clarification. On testimonials, does the panel know of any other uses of the concept of “customary” in tax law, and how that is operationalised?
Q That perhaps underlines my most significant concern about this measure, which is that the term “customary” appears to be an empty category. Perhaps panel members believe that cases will fall into that category, but it seems that unless the testimonial is contractual, it is likely that it will not be “customary”. A testimonial is a bit like a leaving present: every player would hope to have one, but they cannot necessarily expect it. I am concerned about this woolly language creeping into tax law, but perhaps the panel will relieve me of that concern.
HMRC has received guidance on that, and it will ensure that it is clear and properly signposted, so that employers and testimonial committees can work out what it means in their circumstances.
Perhaps we can send you a copy of our guidance. This is very long-standing, and a body of case law in this area helps to identify what we mean by “customary”. There are cases of testimonials that would be considered non-contractual but customary; an example would be if it was the custom that once a player had played for a club for 10 years, they automatically received a testimonial, although that was never written into their contract. A cadre of testimonials would fall into that category, and have done so historically.
Q It would be very helpful if the Committee could have that. It would have been useful to have it before the sitting, because the description given previously by a Minister—not this Minister, I hasten to add—suggested that “customary” might apply if there was a testimonial every year for a departing player or a particular group of players. Anybody who understands a little about football—I should declare that I am the partner of a referee, so, sadly, I know it inside out—knows that it is fairly unlikely that one player would retire every year; that would be slightly strange, so it would be useful to have that guidance.
It is a pleasure to serve under your chairmanship, Ms McDonagh. Testimonials are common among sports groups, and they are not necessarily confined to football—they occur in cricket, rugby and so on. One would assume that there was consultation or engagement with clubs or representative bodies. What feedback did you get from them about the changes you propose?Q
our interest in reforming national insurance contributions for sporting testimonials is long-standing, as is our interest in reforming termination payments, so this measure has been considered for some time. We consulted on it. Inevitably, in the course of that, we got representations from a number of sporting bodies, and Treasury officials and Ministers met some of them. For example, my predecessor, David Gauke, who was then Financial Secretary to the Treasury and is now Lord Chancellor, met the England and Wales Cricket Board, which took a particular interest in this measure. As a result, we took the decision to increase the threshold from £50,000 to £100,000. That is a significant change. Evidence we produced in 2013 suggested that the average applicable testimonial raised around £72,000 a year, so the change will take the vast majority of testimonials out of this measure, which applies only to testimonials that bring in significant receipts.
As far as I am aware, we have not received any representations from sporting bodies since we made the changes to income tax two years ago, and we have received no further representations from sporting bodies since I introduced the Bill a few weeks ago, so I think it has been received reasonably well.
Q May I follow up on a point that Mr Wood made? I felt a certain amount of ambivalence about the statement that the impact on the charity sector would be minimal. Any pound whatever lost to the charity sector is a loss to the charity sector and to the community, so I am slightly worried that the attitude seems to be, “It’s not much.” It will be something. In today’s society, given austerity, any loss to the charity sector is crucial, so it would help if we firmed up at some point what we believe the loss will be.
Perhaps I can firm that up now. If the sportsperson used payroll giving, the loss would be zero. The individual and the sporting testimonial committee need to register for payroll giving, which is available without limit. In that case, there will be no loss to the charity whatever.
Q That is right, but that takes me to my second point, which is that you have almost bureaucratised the process. We are moving from a much simpler process to one in which I suspect the onus will be on the organisation or the individual to make a separate declaration. You can clarify that for me if you want, either today or subsequently.
May I ask a couple more questions? The first is on the loss in the last few years as a result of some sporting testimonials income incorrectly being excluded from national insurance contributions. Secondly, can you confirm how much HMRC receives in income tax and national insurance contributions because of contractual and non-contractual sporting testimonials?
On the second point, I do not think we have a box on methods of collection specifically to note that money is coming in from a contractual or customary sporting testimonial. We would not have a precise figure for that, I don’t think. Raj?
Q Given that answer, can you provide any examples of the confusion that employees have had with the previous tax and national insurance treatment of termination awards?
Long-standing tax and national insurance treatment has relied on an old 1927 case. In that case, it was decided that where a sportsperson received a benefit, or income from a benefit, that was not earnings.
However, since that time, there have been important changes to the tax and national insurance scheme. For example, there was the introduction of the benefits code, which taxes benefits in kind. That was replicated for national insurance contributions. More recently, there have been changes to the Income Tax (Earnings and Pensions) Act 2003 for disguised remuneration—changes that, in certain circumstances, place a tax and national insurance liability on payments by a third party. Those developments threw the treatment of sporting testimonials into a bit of a quandary, because they had overtaken the 1927 case, but HMRC guidance had not been fully updated, and was still based on the 1927 case. The Finance Act 2016 was introduced to try to make that clearer for income tax, and this Bill just follows up for national insurance contributions.
It has definitely put the legal position beyond doubt, whereas before there was this contradiction between the case law and other bodies of legislation. Now it is very clear for tax what the position is, so in that sense, it has met its objective.
It is a generous level at £100,000. It is only the employer side. Speaking as somebody who enjoys watching sport, you want to support sportspeople, but have to be aware of other individuals whose careers can be quite short. There are other examples that have come to us, such as people in the performing arts, ballet and many other areas. That would possibly include MPs, whose career prospects are not always very good when they leave the job. I think £100,000 is, by comparison, a generous situation.