The National Insurance Contributions (Application of Part 7 of the Finance Act 2004) (Amendment) Regulations 2022

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the National Insurance Contributions (Application of Part 7 of the Finance Act 2004) Regulations 2012 (S.I. 2012/1868) (“the Disclosure Regulations”), to correspond with changes made to Part 7 of the Finance Act 2004 (c. 12) (“FA 2004”) by Schedule 31 to the Finance Act 2021 (c. 26) (“FA 2021”).

Part 7 of FA 2004 provides for disclosure to Her Majesty’s Revenue and Customs (“HMRC”) of information relating to arrangements that enable, or might enable, people to obtain a tax advantage. These arrangements are referred to as “notifiable arrangements” or, before they have been put into effect, a “notifiable proposal”. The individuals responsible for the arrangements are known as “promoters” and are obliged to disclose them to HMRC, with related duties falling on their clients. HMRC allocates reference numbers to such disclosed arrangements.

The amendments made by Schedule 31 to FA 2021 now allow HMRC to allocate a reference number to arrangements or a proposal that have not been disclosed, where HMRC reasonably suspects them to be notifiable. In such circumstances, the amendments also extend the obligations in Part 7 to all persons that HMRC reasonably suspects to be supplying the arrangements, or proposals, and their clients.

Regulation 1 provides for citation, commencement and application of the Regulations.

Regulation 2 introduces the amendments to the Disclosure Regulations.

Regulation 3 amends the existing definition of “reference number” in regulation 2 of the Disclosure Regulations.

Regulation 4 inserts a new paragraph (1A) into regulation 5 of the Disclosure Regulations, in order to extend the application of Part 2 of those Regulations to arrangements and proposals which HMRC reasonably suspect to be notifiable contribution arrangements or notifiable contribution proposals.

Regulation 5 updates the table at regulation 5(2) of the Disclosure Regulations to show that new regulations 11D, 12A, 12B, 12C and 13A correspond with sections 310D, 311A, 311B, 311C and 312ZA of FA 2004, which were inserted by FA 2021. It also makes various consequential amendments to other rows in the table.

Regulation 6 amends regulation 7(6) and (8) of the Disclosure Regulations so as to extend the meaning of “making a firm approach to another person” for the purposes of Part 2 of the Disclosure Regulations, so that it now applies to arrangements and proposed arrangements other than notifiable contribution arrangements or notifiable contribution proposals.

Regulation 7 inserts a new regulation 11D into the Disclosure Regulations which, in particular, allows HMRC to issue a notice to a person of the potential allocation of a reference number in cases where HMRC reasonably suspect that arrangements or a proposal for arrangements are notifiable contribution arrangements or a notifiable contribution proposal (as the case may be).

Regulation 8 substitutes regulation 12 of the Disclosure Regulations. New regulation 12 sets out two situations in which HMRC may allocate a reference number to arrangements (including proposed arrangements). The first case where a reference number may be so allocated is a case where a person complies, or purports to comply, with regulation 8(1) or (3), regulation 10(1) or regulation 11 of the Disclosure Regulations in relation to any notifiable contribution proposal or notifiable contribution arrangements (a “paragraph 2” case). The second case is where a notice has been issued under regulation 11D of the Disclosure Regulations in relation to arrangements or proposed arrangements, and the notice period has expired, but the person to whom the notice was given has failed to satisfy HMRC that the arrangements or proposed arrangements are not notifiable contribution arrangements or a notifiable contribution proposal, as the case may be (a “paragraph 3” case).

Regulation 9 inserts new regulations 12A to 12C into the Disclosure Regulations. New regulation 12A imposes a duty on HMRC to notify promoters, or people whom HMRC suspect to be promoters or involved in supplying arrangements, of a reference number which it has allocated. New regulation 12B provides for a right of appeal to the tribunal against HMRC’s decision to allocate a reference number to arrangements or proposed arrangements in a “paragraph 3” case. New regulation 12C imposes a duty on people whom HMRC suspect to be promoters, or involved in supplying arrangements, to provide further information requested by HMRC where HMRC has allocated a reference number to arrangements or proposed arrangements in a “paragraph 3” case.

Regulation 10 makes consequential amendments to regulation 13 of the Disclosure Regulations, so as to require a promoter to notify a client of a reference number in a “paragraph 2” case.

Regulation 11 inserts a new regulation 13A into the Disclosure Regulations. New regulation 13A imposes a duty on a person providing services (a “service provider”) in connection with arrangements or proposed arrangements to provide their client with prescribed information relating to a reference number within a period of 30 days of being advised of the reference number by HMRC.

Regulation 12 amends regulation 14 of the Disclosure Regulations, so as to extend the existing duty in that provision (to notify certain persons of an reference number) to cases where the client receives the prescribed information from a service provider, as set out in new regulation 13A of the Disclosure Regulations.

Regulation 13 amends regulation 14A of the Disclosure Regulations so as to impose a duty on a client to provide prescribed information in cases where they have been provided with information by a promoter under regulation 13(2), or by a service provider under new regulation 13A(2), of the Disclosure Regulations.

Regulation 14 amends regulation 15 of the Disclosure Regulations in order to extend the existing duty in that provision to “paragraph 3” cases.

Regulation 15 amends regulation 16 of the Disclosure Regulations to extend the existing duty in that provision (for a promoter to provide HMRC with details of their clients) to people who are subject to the new duty in regulation 13A of the Disclosure Regulations.

Regulation 16 amends regulation 16A of the Disclosure Regulations to allow HMRC to require a service provider to provide prescribed information.

Regulation 17 amends regulation 16B of the Disclosure Regulations, principally to extend the application of that provision to cases involving service providers as well as promoters.

Regulation 18 amends regulation 21 of the Disclosure Regulations to insert references in that provision to new regulations 12C and 13A(2) of the Disclosure Regulations, so that information required under those provisions must be provided in a prescribed form.

Regulation 19 amends regulation 21A of the Disclosure Regulations to insert a reference in that provision to new regulation 13A(2) of the Disclosure Regulations, so that HMRC may require additional information to be provided to users of arrangements or proposed arrangements.

Regulation 20 amends regulation 21C of the Disclosure Regulations, to create new rules about cases where HMRC may publish information about arrangements or proposed arrangements which have been allocated with a reference number. It also provides for the time periods within which HMRC may publish such information, and that no information may be published in respect of a person involved in the supply of such arrangements or proposed arrangements where there are reasonably grounds for believing that the person’s involvement is limited to activities subject to legal professional privilege.

Regulation 21 makes consequential amendments to regulation 21D of the Disclosure Regulations, to reflect the amendments made to regulation 21C.

Regulation 22 amends regulation 22 of the Disclosure Regulations, which applies the penalty provisions in section 98C of the Taxes Management Act 1970 (c. 9) to breaches of the Disclosure Regulations. Regulation 22 extends these provisions to include failures to comply with new regulations 12C and 13A(2) of the Disclosure Regulations, and makes other consequential amendments.

Regulation 23 amends regulation 26 of the Disclosure Regulations in various places to take account of amendments made to the Tax Avoidance Schemes (Information) Regulations 2012 (S.I. 2012/1836) by the Tax Avoidance Schemes (Information) (Amendment) Regulations 2021 (S.I. 2021/980).

A Tax Information and Impact Note covering this instrument was published on 12th May 2021 alongside information about amendments to section 132A of the Social Security Administration Act 1992 (c. 5) and is available on the website at https://www.gov.uk/government/publications/proposals-for-tackling-promoters-and-enablers-of-national-insurance-contributions-avoidance-schemes. It remains an accurate summary of the impacts that apply to this instrument.