Extent, commencement and short title

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill – in a Public Bill Committee at 3:30 pm on 14th May 2019.

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Photo of Kirsty Blackman Kirsty Blackman SNP Deputy Leader, Shadow SNP Spokesperson (Economy) 3:30 pm, 14th May 2019

I beg to move amendment 1, in clause 5, page 5, line 39, at end insert—

‘(3A) No regulations may be made under subsection (3) until the Secretary of State has made a Statement to the House of Commons on how the Government intends to raise public awareness of the provisions of this Act, including awareness among people who may attend sporting testimonials that their donations may generate a National Insurance liability.”

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

With this it will be convenient to discuss clause stand part.

Photo of Kirsty Blackman Kirsty Blackman SNP Deputy Leader, Shadow SNP Spokesperson (Economy)

A lot of the discussion on sporting testimonials, particularly on Second Reading, concerned potential behavioural change of the people who go along to sporting testimonials, and who pay money so that the person they are attempting to honour can receive the funding. Obviously, fans are aware that some of the money they give will be used to pay for the ground used for the testimonial match, and for food, drink and other costs. However, I am concerned that the Government’s introducing this measure without spending enough time ensuring that there is public awareness of the change will mean that fans are not necessarily aware that some of the money will be top-sliced, or will generate a class 1A national insurance liability that HMRC will require to be paid.

I certainly do not think that fans going through the turnstiles at such events imagine that some of their potential donations will go to HMRC. It is incredibly important, if the Government are keen to ensure transparency, that fans are aware of this when they go through the turnstiles. That is probably more important when payment is made on a donation basis rather than a fixed ticket price basis. People are then giving money that they choose to give. It is important that fans are aware of what proportion of that money beyond £100,000 is likely to go to HMRC, and what will be received by the sporting individual.

On public awareness of the provisions of the measure, the intention of HMRC and the Government around termination payments is to try to stop companies dodging tax or to close a tax loophole. I understand that there are some cases to back that up whereby companies are perhaps giving pay in lieu of notice as a termination payment, instead of paying in lieu of notice and just ending the contract at that point. If HMRC intends that loophole to be closed, it is important that employers and employees are aware that the loophole has been closed, so that they can comply with the law.

The other point I raised earlier about public awareness, is the importance for employers who will have the class 1A national insurance liability to have as much notice as possible about what new computer systems or changes they will need to make in order to comply with the real-time nature of the collection of the tax and to change their redundancy policy. If they currently have a redundancy policy that involves, in an unspoken way, not paying in lieu of notice and terminating the contract instead with a compensatory payment, those companies will need to ensure that they change their policy in order to comply with the law in the way the Government intend.

Now that I have thought of a clause on public awareness, I might table it in every Bill Committee I sit on. I give the Minister fair notice. It is important that the Government let us know, in terms of transparency, how they intend to communicate with those three classes of people: the employers, the employees and the sporting fans who attend testimonial matches.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary 3:45 pm, 14th May 2019

I will briefly describe the purpose of clause 5 before turning to the hon. Lady’s amendment. First, the clause confirms that the Bill applies across the whole of the UK. That is because national insurance is an excepted matter under the Northern Ireland Act 1998. Secondly, it provides that the clause takes effect on the day that the Bill is passed.

The clause also provides that the provisions in the Bill come into force on a day that regulations specify. It is intended that they will take effect on 6 April 2020. That was previously announced at Budget 2018 and will ensure that the measures come into force at the start of the 2020-21 tax year.

Finally, the clause provides that the Bill, once passed, will be known as the National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019. Those are all technical matters and there is no substantive issue to discuss specifically in relation to the clause.

Let me deal with the amendment of the hon. Member for Aberdeen North, which centres on how we might communicate the measure to raise public awareness. Without repeating myself, this is one of those Bills that has been around for some time, has been consulted upon and been part of Budget measures. I will not repeat the list I already read out. It is well known and is expected by members of the public who take an interest in these matters—perhaps a limited number—and by tax professionals and employers. I do not think that on this occasion a specific public communication awareness campaign is necessary.

On sporting testimonials, and whether there would be value in educating members of the public that in some circumstances a proportion of the money they spend on their ticket prices or donations will go to the Exchequer, it is worth remembering that any contractual testimonial is already subject to income tax, and also to employers’ and employees’ national insurance contributions, as a result of prior legislation in the Finance Act. The income taxes payable above £100,000 for those testimonials fit into that category. Unless it was specifically advertised by the organisation holding the testimonial, there is no way today that an individual would know which of these categories their particular testimonial would fall into. I am not sure that there would be any value in specifically advertising to members of the public that we have made this change. If anything, the changes we are making in the Bill increase alignment and simplicity, and increase the number of occasions when some tax will be paid to the Exchequer when a member of the public goes to a testimonial that raises a significant sum of money.

Without exactly knowing the feelings of all sports fans, in many cases I think they would expect that a particularly well-paid sportsperson holding the testimonial likely to raise in excess of £100,000 at the end of a successful career would be paying their fair share of tax, and that their sporting testimonial committee would be paying employers’ national insurance. I do not think that fans’ automatic assumption would be that well-paid sportspeople would pay no tax on the money they make. I appreciate that there are many examples of players being injured and so on, where people would feel particular sympathy for them as individuals.

On the wider point of HMRC’s communication, we regularly communicate with stakeholder groups, including representative bodies. We have employer bulletins that give news, including our latest developments, through quarterly updates. That would be particularly relevant to termination payments, where employers could access the latest information as a result of the passage of this Bill in due course. We are currently in consultation with software providers to advise them of these changes, should they become law. We hope that they will be able to make those changes as soon as possible.

As I said previously, the purpose of bringing this Bill forward now, rather than delaying it any further, was to ensure that there was good time available for employers to make the necessary changes. We hope that we will be able to have it on the statute book in sufficient time for all the relevant stakeholders to make the necessary changes, subject to the smooth passage of this Bill.

Photo of Kirsty Blackman Kirsty Blackman SNP Deputy Leader, Shadow SNP Spokesperson (Economy)

I thank the Minister for his response, particularly around general public awareness. It is important that sports fans in particular are aware that their donation is likely to generate a tax liability. The fact that that was not done before is a bit of a failure. It should be the case that sports fans should have a higher level of awareness. I do not intend to press the amendment at this stage, and I beg to ask leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.